Are Lottery Winnings Part of a Bankruptcy Estate?

October 8, 2023 By: Carrie Weir

Can You Keep Money that You Win if You Have Filed for Bankruptcy Protection?

If you’ve filed for bankruptcy protection under Chapter 7 and you hit it big in the Lotto, winning the Powerball or Mega-Millions, chances are good your financial troubles will be behind you. But what if you bought a lottery ticket and won a smaller, but significant, cash prize? Will you be able to keep your winnings or will they go into the bankruptcy estate, to be used to repay your creditors? That depends on a couple of factors.

When Did You Purchase the Lottery Ticket?

When making the determination as to whether or not the prize is part of your bankruptcy estate, the court will look at the date that you purchased the ticket. Neither the date of the drawing nor the date you receive the prize will be a factor. Here’s how the date of purchase will affect your right to keep the winnings:

• You purchased the ticket before you filed for bankruptcy—Any property that you own at the time of filing becomes part of the bankruptcy estate (unless you can claim an exemption for it). Because a ticket purchased is considered property, the ticket must be turned over to the bankruptcy court and any winning will be listed as part of your bankruptcy estate. Note that it won’t matter that the actual drawing didn’t occur until after you filed for bankruptcy. The ticket will still belong to the bankruptcy estate.
• You purchased the ticket after you filed for bankruptcy—Provided that you did not violate any bankruptcy laws (such as by hiding assets, for example), you do not have to include any winnings for tickets purchased after the date of filing in your bankruptcy estate.

Are There Ways to Protect Lottery Winnings that May Be Part of Your Bankruptcy Estate?

Every state (as well as the federal government) provides for the exemption of certain types and amounts of property from a Chapter 7 bankruptcy estate. The Texas state bankruptcy exemptions are among the most generous in the country, allowing you to claim up to $50,000 for an individual and $100,000 for couples for personal property.

Contact an Experienced Rockwall, TX Bankruptcy Attorney

You can convert a Chapter 13 bankruptcy filing to a Chapter 7 liquidation At the Law Offices of Carrie Weir, all potential clients are entitled to a free initial consultation. To arrange an appointment, contact my office online or call 972-772-3083. I handle Texas personal bankruptcy filings in Kaufman County, Rockwall County, Collin County, Dallas County, Hunt County and the surrounding counties.