What Happens If I Win The Lottery, Hit A Jackpot Or Have Some Other Windfall While In Bankruptcy?

Should you be lucky enough to recover a windfall, such as a hitting the lottery or a jackpot, while you are in an active bankruptcy, you must disclose it and it will become property of the bankruptcy estate. These types of windfalls are generally not exempt.

In Chapter 7, you will likely be required to turn over the windfall proceeds to the bankruptcy trustee for distribution to creditors. Your attorney may be able to negotiate with the trustee, allowing you to keep some of the proceeds depending on the facts of your case. You are required to disclose any windfall received within 180 days of the filing of your bankruptcy petition, even if the case is already closed and discharged. Failure to do so, if discovered, can result in the reopening of your case and an action to vacate your discharge due to bad faith.

In Chapter 13, the rules are a bit simpler. You are required to disclose any windfall that you receive while the case is pending and it becomes property of the bankruptcy estate. You will likely have to turn over to the Chapter 13 trustee as much of the proceeds as necessary to pay your creditors in full. If your Chapter 13 plan is already paying your creditors in full, you may be given the option to keep some or all of the proceeds and continue with the plan or pay off the case immediately from the proceeds, depending on your case and your trustee. An experienced bankruptcy attorney can negotiate the best result for you based on the facts of your case and their knowledge of the trustee and court in your jurisdiction.

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