Don’t Forget Lotto Winnings when Filing Bankruptcy

Posted July 17, 2010 in Creditor/Debtor by Arthur Buono

An honest debtor deserves a fresh start in bankruptcy. A disbarred attorney who hid $70,000 a year in lottery payouts from his personal bankruptcy filing probably does not. As the Boston Herald reported Friday, he may deserve jail time.

 
  • Bankruptcy forces trade-off between what you have and what you owe
  • Wiping out debts depends on full disclosure of income and assets
  • False statements and hiding funds can land you in jail

 

Attorney Charged with Bankruptcy Fraud

The attorney filed for bankruptcy in 2005. He claimed he had $2,000 to his name. Federal prosecutors say the attorney was receiving $35,000 a year from each of two winning lottery tickets. He had purchased the annual payouts at a discount from the actual winners who wanted lump sums.

A bankruptcy filing can provide relief if you are overburdened with debt. The bankruptcy judge can wipe out or readjust your debts so that you can start over or gain breathing space from creditors. You must be willing to apply most of your assets and/or income to pay what debts you can in order to get that fresh start.

Bankruptcy does not let you have your cake and eat it too. If you try to game the system by hiding income or property that should be used to pay your debts two things may happen, both of them bad. First, the judge probably will dismiss your case and leave you at the mercy of your creditors. Then a federal prosecutor may charge you with bankruptcy fraud, and your condition will go from bad to worse just like that.

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