Submitted by Rachel R on Thu, 03/28/2013 - 10:29pm
Image source: Visual.ly
If you play the lottery, you probably have big “what if” plans. What you’ll buy, where you’ll go, what you’d do if you hit the big jackpot. If you know someone who has won the lottery, you may think they’ve got it made. But in fact, research has revealed that if you land a whopping big lottery prize, there’s a whopping big change you’ll end up filing bankruptcy.
We’ve all heard tales of the “lottery curse” but these cautionary tales seem more coincidence than cause and effect. But a study co-produced by Vanderbilt University, University of Kentucky and University of Pittsburgh titled The Ticket to Easy Street? The Financial Consequences of Winning the Lottery showed that some lottery winners are much more likely to file for bankruptcy.
Image source: PALottery.state.pa.us
So how much do you have to win for things to go awry? The study examined Florida lottery winners who had won either large awards between $50,000-$150,000 or relatively small prizes. The intent was not to put the lottery curse to a statistical test, but rather to see whether financially distressed people were likely to see long-term debt relief when given large cash transfers. This could be an indicator of whether government assistance in the form of cash helped those in poverty in the long-term.
Statistically, it’s the poorest Americans who play the lottery. The Journal of Gambling reviewed demographic research on lottery players and said the “poor are still the leading patron of the lottery.” The study results showed that of people who were seriously in debt and already on the road to bankruptcy, winners of a large cash award from the lottery ($50,000-$150,000) were more likely to file bankruptcy three to five years after winning than those who only won small prizes.
Image source: SSRN.com
This begs the question, how does more money trigger a greater propensity to file for Chapter 7 bankruptcy relief? All things being equal, it seems that a significant lump of cash should allow the troubled consumer to regain (at least to some extent) their financial footing. But the numbers say otherwise.
Here what the study found: “This implies that even though the median winner of a large cash prize could have paid off all of his unsecured debt or increased equity in new or existing assets, he did neither.” The study concluded that large prize lottery winners did not use their gambling proceeds to service debt, but rather consumed the cash.
Image source: TotalBankruptcy.com
With the recession grinding on and the job and housing markets still lackluster, there are plenty of Americans springing for Powerball or Mega Millions tickets in hopes of a brighter financial future. If you’re one of those struggling with debt and looking for a way out, a North Carolina bankruptcy attorney will tell you that filing bankruptcy can give you the fresh start you need. If you do decide that you want to play the lottery, treat it as a game and not a financial solution. And if you do get lucky and win a prize – large or small – use it wisely!
To learn more about Chapter 7 bankruptcy and whether it’s right for you, contact a reputable North Carolina bankruptcy attorney.
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