Lotto Winners May Be More Likely to File for Bankruptcy

Lotto Winners May Be More Likely to File for Bankruptcy

Lotto Winners May Be More Likely to File for Bankruptcy

Print
Email
|

by ABC News

WHAS11.com

Posted on November 29, 2012 at 11:03 PM

(ABC News) -- The late hip-hop artist Notorious B.I.G. said it best with his rap single, "Mo Money Mo Problems."

A group of economists conducted research about whether that was true. Scott Hankins of the University of Kentucky, Mark Hoekstra of the University of Pittsburgh and Paige Marta Skiba of Vanderbilt University studied people who won more than $600 from the Florida Lottery between 1993 and 2002.

Their paper, "The Ticket to Easy Street? The Financial Consequences of Winning the Lottery," was published in October 2009.

Although they found recipients of $50,000 to $150,000 were 50 percent less likely to file for bankruptcy in the two years after winning relative to small winners, "they are equally more likely to file three to five years afterward."

Just because you win money does not mean you will be able to manage or hang on to it for very long.

"Bankruptcy records indicate 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 chose not to do either," the researchers found.

Some people choose to maintain their normal lives even after hitting the jackpot.

Bruce Sacerdote, economics professor at Dartmouth College, studied the effects of lottery winnings from Massachusetts winners in the 1980s. He found that several years after winning big prizes, about 40 percent of winners were still working for various reasons.

For each $100,000 won per year, people reduced labor market earnings by $11,000 and people saved about 16 percent of their gross winnings, on average.
 

Print
Email
|