How Your Neighbor's Lottery Winnings Can Lead You to Bankruptcy


It probably seems strange to most of us that lottery winners can eventually end up in bankruptcy despite receiving a rather substantial windfall. But it is even stranger to consider that the neighbors of lottery winners are more likely to declare bankruptcy than the winners themselves. According to a study released by the Federal Reserve Bank of Philadelphia, there is a statistically greater chance that someone living in the same neighborhood as a lottery winner will eventually declare bankruptcy as compared to the general population.

The study looked at a particular Canadian community and their combined lottery winnings and bankruptcy filings over a ten-year period. Researchers discovered that for every $1,000 in lottery winnings, the chances that someone living in the same neighborhood would eventually declare bankruptcy increased some 2.4%.

Furthermore, the likelihood of bankruptcy among neighbors increased along with the value of visible assets accumulated by lottery winners. In other words, if lottery winners purchase new cars, new houses, and other things neighbors could see on a daily basis, those neighbors were more likely to declare bankruptcy in the future.

Trying to Keep Up

As bizarre as this study may sound, researchers say the results make perfect sense. It is all based on the idea of income inequality. For example, people have a natural tendency to want to keep up with the neighbors even when there are no lottery winnings involved. When a neighbor does win the lottery, keeping up may mean overextending oneself on credit cards, taking out large personal loans, or leveraging equity to get the largest secured loan possible.

Researchers say that having a wealthier person in the neighborhood induces less wealthy residents to purchase more visible assets in order to present the image that they are keeping up. In the case of a lottery winner, the standard for the neighborhood instantly increases in line with the lottery winner’s spending habits. Those who spend more on their own visible assets to match the winner can quickly find themselves in trouble.

Do What You Can to Avoid Bankruptcy

We find the lottery winnings study to be fascinating if for no other reason than it offers yet another explanation of why some people end up in bankruptcy despite having an adequate level of income for most of their lives. The study also reminds us that there is no standard pattern for financial troubles that lead to bankruptcy. Anybody is susceptible if sound financial management is not practiced.

The best advice we can give anyone is to take whatever steps are necessary to avoid bankruptcy. While bankruptcy can be an option for solving severe financial problems, it is far better to never get to a place of having such problems. Keeping your financial house in order throughout your lifetime is far better than having to endure the crash and burn of U.S. Bankruptcy Court.

Having said that, we also understand that bankruptcy may be a person’s best option in times of dire financial straits. We specialize in helping people who find themselves in that position. Our bankruptcy attorneys have years of experience helping people in filing bankruptcy proceedings and getting their lives back on track. We can help you.

The lottery winnings of your neighbors notwithstanding, you can overcome your financial problems with the right help. Please don’t hesitate to contact us to find out if bankruptcy is the best option for you. We will walk you through all of your options, provide you with the necessary advice, and ultimately let you make your own decision.

Convenient Locations

In order to provide convenience for clients throughout Chicago and Northern Illinois, we have offices in the following locations: 

Chicago • Schaumburg  • Oakbrook • St. Charles • Naperville • And More


We have office locations throughout the Chicago Area:

Chicago (Downtown)


Oak Brook


All calls are routed through our Downtown office for your convenience.

Phone: 312-967-3159

Sign Up for Our Newsletter
Subscribe Here