Bankruptcy is weak hand as online gambling debt rises

UNTIL recently gamblers at least had to make a little effort in order to lose their hard earned cash. For a start they had to leave the comfort of their own homes before withdrawing cash and heading to the nearest bookies.

But now, the growth of online gambling sites, and the ready availability of consumer credit, have combined to make it easier than ever for gamblers to lose a fortune.

Every month four million Britons place a bet on a gambling site. It did not exist five years ago, but the arrival of internet betting on games such as poker has created a market worth an estimated 500 million in Scotland alone.

Gambling in Scotland has hit record levels, with the average adult now spending nearly 1,900 a year on games of chance. Over recent months I have dealt with several cases of individuals who have been made bankrupt after having run up debts above 100,000 on internet gambling.

The latest figures show nearly three times as many Scots are going bankrupt in 2006 as in 1990. Today, with more households than ever having broadband access, readily available consumer credit means salary no longer acts as an effective restriction to anyone who fancies a flutter online because they can rack up exorbitant amounts of debt on credit cards any time of the day or night from the comfort of their own home.

So what happens if someone runs up a huge credit card bill that they are unable to pay due to a losing streak? While in England and Wales they can submit a petition, at a cost of around 500, to the county court and automatically be declared bankrupt, in Scotland the process is not so easy.

In Scotland there's a requirement that one or more of an individual's creditors owed not less than 1,500 must take some sort of positive action against him or her. This usually means going to court and getting a decree, and then extracting a charge for payment. Alternatively, if a creditor has served a "21 day demand", and the 21 days have elapsed without a response, this provides either the debtor or the creditor with a means to present a petition for sequestration.

How long it takes before a bankrupt can once more be considered for mainstream financial products will depend on how long the credit reference agencies keep their details, though it will typically be at least six years. During the course of bankruptcy, which lasts three years in Scotland but only a year in England and Wales, they are not allowed to take on credit of more than 250 without telling the lender they are bankrupt.

It would be quite wrong for bankruptcy to be considered as an easy way for gamblers who have suffered a losing streak to escape having to pay their spiralling debts. Although there might be the odd unscrupulous person who racks up debts with the intention of subsequently declaring his or herself bankrupt in order to escape their creditors, there are unlikely to be many individuals falling into that category.

While credit can be a convenient tool, in the hands of a gambler, convenience is not necessarily a good thing. If we are to see a decline in the overall number of bankrupts in Scotland, then we need to see more people striking the right balance between managing their credit and becoming a debtor. But though lenders provide the means to go into debt, responsibility for our personal finances rests ultimately with ourselves - and it's rarely worth the gamble.

• Eileen Blackburn is head of French Duncan's business recovery arm.