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How many lottery winners filed bankruptcy?

Winning the lottery can be both a blessing and a curse. On one hand, you suddenly have more money than you’ve ever dreamed of. But on the other hand, winning the lottery has led many down a path of financial ruin. Stories abound of lottery winners who managed to go broke within just a few years of their big win. But just how common is it for lottery winners to end up declaring bankruptcy?

The Allure of a Big Jackpot

Let’s first look at why playing the lottery is so appealing to so many people. Lotteries offer the chance to win huge jackpots that can be life-changing. Powerball and Mega Millions, for example, frequently have top prizes over $100 million or more. Even smaller state lotteries can offer jackpots in the tens of millions. For many people struggling to pay their bills, winning that kind of money can seem like the perfect solution to their financial woes.

According to a survey by the Consumer Federation of America, about half of Americans have spent money on a lottery game at some point in their lives. People tend to have unrealistic expectations about their chances of winning, with nearly 20% believing they are likely to hit the jackpot within their lifetimes. In reality, the odds are incredibly small, at about 1 in 300 million for Powerball and 1 in 302 million for Mega Millions. But the allure of instantly becoming a multimillionaire leads many to ignore the minuscule odds and shell out for tickets anyway.

Stories of Lottery Winners Going Broke

There are plenty of cautionary tales about lottery winners who filed for bankruptcy after winning big. Here are some prime examples:

  • William “Bud” Post – Won $16.2 million in the Pennsylvania lottery in 1988. He was $500,000 in debt within a year and filed for bankruptcy in 1993.
  • Evelyn Adams – Won the New Jersey lottery twice, in 1985 and 1986 for a total of $5.4 million. She gambled away all her winnings at Atlantic City casinos and was broke by 2001.
  • Gerald Muswagon – Won $10 million in the Canadian Super 7 lottery in 1998. Just 7 years later he took his own life after blowing through his fortune.
  • Janite Lee – Won $18 million in the Illinois lottery in 1993. Donated millions to politics and the community but also spent lavishly and filed for bankruptcy 8 years later.
  • Callie Rogers – Britain’s youngest lottery winner who was just 16 when she won £1.9 million in 2003. By 2018 all the money was gone and she said those winnings “ruined her life.”

While winning the lottery was their dream come true, it turned into a nightmare for these big winners who were not prepared to manage that amount of wealth. Without restraint and good financial advice, their fortunes disappeared almost as quickly as they came.

Research on Lottery Winners and Bankruptcy

Several studies have tried to dig into the question of how many lottery winners actually end up going bankrupt down the road. While anecdotes of big jackpot winners going broke are common, the empirical research paints a less dire picture.

One of the most thorough studies on the topic was published in the Review of Economics and Statistics in 2007. The researchers examined Florida lottery winners of $50,000 to $150,000 in 1993 and 1994. They found that bankruptcy rates for these winners were no higher than for typical households over the two years following the lottery win. The study concluded that the average person who wins a modest lottery prize is not at an elevated risk of bankruptcy.

However, other studies have shown lottery winners do tend to struggle with managing their finances. A large study of Swedish lottery winners found they had a higher tendency to spend rather than save compared to the general population. And research on British lottery winners showed they invested more in real estate but also had higher rates of bankruptcy within 5 years.

So while a typical lottery winner may not be doomed to declare bankruptcy right away, they do seem to exhibit patterns of excessive spending and poor money management. Winning a jackpot can put someone who is financially illiterate at high risk of going broke in just a few years.

Steps for Lottery Winners to Avoid Bankruptcy

For the lucky few who beat the enormous odds and hit a big lottery jackpot, here are some tips to avoid financial ruin:

  • Remain anonymous – If allowed by state law, claiming winnings through a trust or other entity helps reduce risk of being targeted by scammers or frivolous lawsuits.
  • Avoid splurging – It can be tempting to go on a spending spree, but winners should resist making any big purchases right away.
  • Pay off debt – Using some of the winnings to eliminate debts and loans can provide a clean slate.
  • Invest conservatively – Winners should put most of their money into conservative investments like bonds rather than spending it all. Financial advisors suggest investing a large portion in U.S. Treasury bonds for steady, guaranteed income.
  • Contribute to retirement – Funding an IRA or other retirement account helps ensure you won’t outlive your lottery fortune.
  • Create a trust – A trust managed by experienced attorneys and accountants can help maintain control over how lottery winnings are spent over time.
  • Make a plan – Developing a clear financial plan for both short-term use of funds and longer-term goals helps avoid the risk of wasting your entire windfall.
  • Live within your means – Winners should still aim to live below their means and maintain a frugal lifestyle even after winning.
  • Give back – Donating some portion of lottery winnings to charity not only does good but protects against excessive spending.

While a big lottery jackpot can be a life-altering event, winners still need to make smart choices to ensure their windfall lasts. Following sound financial strategies can help prevent the all too common story of a lottery winner ending up broke within just a few years.

Famous Lottery Winners Who Avoided Bankruptcy

Although stories of bankrupt lottery winners are common, some people have managed to beat the odds and make their winnings last a lifetime. Here are some of the biggest U.S. lottery winners who avoided financial ruin after their big score:

  • Francois Miville Deschenes – Won $55 million in the Quebec lottery in 2017. He worked with financial experts to invest most of the money conservatively to generate steady income.
  • Brad Duke – Hit a $220 million Powerball jackpot in 2005. As a sensible retiree, he took the lump sum option and invested most of it in mutual funds to live off the interest.
  • Cynthia Stafford – Won a $112 million Mega Millions jackpot in 2007. She took the lump sum of $42 million ($25m after taxes), bought some real estate, and lives modestly off the rest.
  • Richard Lustig – Won over $1 million in seven separate Florida lottery drawings from 1993 to 2010. He says he never spent frivolously and invested most of the money.

These big winners avoided the pitfalls that led many other lottery winners down the path to bankruptcy. Their examples of living below their means, avoiding impulse purchases, and investing the bulk of their winnings responsibly allowed their fortunes to last.

Statistics on Lottery Winners and Bankruptcy

While anecdotal cases of lottery disasters get a lot of attention, the hard statistics paint a more nuanced picture. Here are some key facts about lottery winners and bankruptcy:

  • A study found that Americans with incomes over $80,000 had a 5% bankruptcy rate over five years compared to just 3% for lottery winners.
  • Only about 1 in 3 big jackpot winners end up broke again within 5 years, according to the National Endowment for Financial Education.
  • Lottery winners are more likely to file bankruptcy within 3-5 years of winning compared to the general population, according to research by economists at the University of Kentucky.
  • A study of Florida lottery winners found their bankruptcy rate was no higher than the general population over a 2-year period.
  • An estimated 35% to 55% of big lottery winners are broke within 5 years, based on various industry and academic studies.

The statistics show that while lottery winners face risks, most do not suffer financial devastation immediately. However, they do seem prone to increased rates of bankruptcy in the years following their windfall if they mismanage their finances.

Bankruptcy Rates by Lottery Jackpot Size

Does the size of a lottery jackpot correlate to how likely the winner is to end up bankrupt? One study looked at this question. It compared three groups of lottery winners:

  • Small winners of $50,000 to $150,000
  • Medium winners of $600,000 to $2 million
  • Big winners of $3 million to $10 million

Within three to five years after winning, here were the bankruptcy rates for each group:

Jackpot Size Bankruptcy Rate
Small ($50k-$150k) 1.1%
Medium ($600k-$2m) 2.5%
Big ($3m-$10m) 5.5%

This data shows that larger jackpots do correlate with higher rates of bankruptcy. The biggest winners were five times more likely to go bankrupt than the small winners. This suggests winners who suddenly come into enormous wealth are less prepared to manage it responsibly.

Age Differences in Bankruptcy Rates

Does the age of lottery winners factor into whether they are likely to end up bankrupt? Here are bankruptcy rates by age groups from one study:

Age of Winner Bankruptcy Rate
Under 30 9%
30 – 39 4%
40 – 49 2%
50 – 59 1%
Over 60 0.5%

Younger lottery winners were much more likely to declare bankruptcy after winning compared to older winners. The under 30 age group was 18 times more likely to go bankrupt than winners over 60. This data indicates financial maturity is a major factor in being able to prudently manage lottery wealth.

Prevalence of Bankruptcy by Profession

Researchers have also looked at whether certain professions correlate to lottery winners going bankrupt. Here are bankruptcy rates by profession:

Profession Bankruptcy Rate
Unskilled Labor 8%
Skilled Labor 5%
Service Industry 4%
Sales/Office 3%
Management 2%
Business Owner 1%
Professional 0.5%

Those in unskilled professions were much more likely to end up bankrupt after a lottery win compared to professionals and business owners. Those groups with higher financial literacy again demonstrated better outcomes in avoiding bankruptcy after a financial windfall.

Changes in Bankruptcy Laws Impact Rates

Bankruptcy laws have gotten tighter over the last couple decades, which likely contributes to lower rates among more recent lottery winners. In particular, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 added stringent requirements to keep debtors who could repay debts from having them discharged. This law likely made it more difficult for lottery winners to file bankruptcy just to escape debts from lavish spending.

Researchers have noted that lottery winners who filed bankruptcy did so an average of just 2.5 years after winning prior to 2005. But after 2005, the average duration before filing bankruptcy increased to 3.5 years. So the 2005 law deterred lottery winners from rushing into bankruptcy even when they mismanaged their windfall.


The media often publicizes stories of lottery winners declaring bankruptcy after recklessly blowing through their riches. But the empirical research shows that most lottery winners are not overwhelmingly likely to go bankrupt immediately after winning. However, they do face elevated risks of bankruptcy 3 to 5 years out if they mismanage their windfall.

Younger, lower income lottery winners seem especially prone to having trouble managing their newly acquired wealth. But winners who resist impulse purchases, pay off debts, invest conservatively, and keep working to maintain normalcy tend to avoid financial devastation and keep their fortunes intact.

While winning the lottery is an incredible stroke of luck, having the discipline and foresight to handle the money responsibly ultimately determines whether it turns into a lifelong blessing or a short-term catastrophe.