Although Alabama does not participate in the Powerball lottery, news of the recent, massive jackpot swept through the nation. While winning the lottery may seem like a permanent solution to financial problems, Alabama residents may be interested to discover that more money may actually lead to more problems.
A group of economists conducted research about whether lottery winners were more likely to file for bankruptcy. The economists studied people who won more than $600 between 1993 and 2002 from one state's lottery.
The study found that people who won $50,000 to $150,000 were 50 percent less likely to file for bankruptcy within two years as compared to those who won smaller amounts. However, the same group of winners was just as likely to file for bankruptcy within three to five years of winning, as compared to those with smaller winnings.
The findings indicate that just because someone wins money doesn't mean they are guaranteed long-term financial security. Bankruptcy records show that even though winners of a significant cash prize could have used the money to pay off all unsecured debt or increase equity in assets, they usually chose to do neither of those things.
Although the findings are interesting, the truth is that most people in today's economy file for bankruptcy due to factors out of their control. Job loss, business failure and underwater home mortgages are all common reasons for people to seek bankruptcy relief.
Personal bankruptcy is frequently the best available option for people facing financial difficulties, regardless of what sent them into debt. Both Chapter 7 bankruptcy and Chapter 13 bankruptcy are available for individuals. The type of filing best for your situation depends on a number of factors, but the end result can be the same: a fresh financial start.
Source: ABC News, "5 reasons You're Lucky You Didn't Have Winning Powerball Numbers," Susanna Kim, Nov. 29, 2012