In national news, a man in South Carolina has won the 2nd largest lottery jackpot in history. While it may be hard to believe, even a $1.5 billion lottery winning has the potential to be squandered. A higher number of lottery winners go bankrupt after winning than do not.
Percentage of Lottery Winners That Go Bankrupt
Most people guess incorrectly when asked what percentage of lottery winners end up broke. According to the National Endowment for Financial Education, a whopping 70% of lottery winners end up broke and filing for bankruptcy. So how soon do lottery winners end up going broke? As little as five years. They are more than twice more likely than the average consumer.
Why Lottery Winners Go Bankrupt
While it’s hard to believe that winning millions of dollars only to lose it all, it happens quite often. For winners, financial advice is plentiful and flowing and will come from individuals that are not qualified to offer it to you. Here are some of the main reasons that lottery winners go bankrupt instead of building a comfortable nest egg that will last them the remainder of their natural lives.
Friends and Family
If you don’t remember whom you owe money to, win the lottery, and they will find you. Lottery winners commonly report that friends and distant family they haven’t spoken to in years reach out to them after they hear of the good news. While nearly every big winners spread the wealth to differing levels, financial advisers state that giving away too much money to acquaintances and family members is one of the leading causes of going bankrupt. Some legal experts recommend putting one individual whom you trust in charge of handling requests for money from everyone. This “buffer” can essentially help deal with everyone that will inevitably seek you out for a handout.
Not Obtaining an Attorney and Financial Adviser
The vast majority of lottery winners aren’t experienced with managing millions of dollars. When these funds are awarded, people tend to surround themselves with unqualified “consultants” who either don’t have the right experience themselves or who don’t have the winner’s best interest in mind. Notwithstanding, the very first person a lottery winner should hire is a qualified attorney and financial adviser to protect them from making bad business decisions.
The list of why lottery winners go bankrupt wouldn’t be truly complete without mentioning the extravagant and sometimes idiotic purchases that winners have made after coming into a large amount of cash.
Debt and Insolvency
Insolvency can happen to anyone who doesn’t keep tight control of their finances, overuse of credit, encounters a divorce, or is the target of adverse legal actions. Even wealthy individuals or lottery winners aren’t immune to running out of money. Once insolvency occurs, some form of debt relief must be enacted to rectify the situation. Chapter 13 bankruptcy is one form of debt relief that thousands of Americans initiate every month to receive a second chance at financial health.
Chapter 13 bankruptcy
Lottery winners are sometimes recorded as saying that they wish they had never won the lottery or that it ruined their life. The fact that people being worse off for winning the lottery is proof that money can’t buy happiness. Because money shouldn’t be tied to happiness, insolvency or debt shouldn’t either. The US Bankruptcy Code was specifically designed to relieve the burden that excessive debt places on a person. Lottery winner or not, if you’ve been struggling to pay back unsecured debt while meeting your other secured debt obligations, contact a Dallas Bankruptcy Lawyer to find out how you can receive a new financial start using Chapter 13 bankruptcy.