Can Lottery Winnings Be Garnished to Pay Judgments?

When you owe money to a creditor, one of the strategies that it could use to collect is a wage garnishment. This involves taking money straight out of your paycheck before you ever see it. This process can be used not only with your wages but also with other income, including lottery winnings.

Using a Judgment

If you are concerned about losing part of your lottery winnings to a creditor through a garnishment, several factors will come into play. The creditor cannot just take part of your lottery winnings unless it has a judgment first. This means the creditor will need to file a civil lawsuit against you and obtain a ruling that verifies the debt. Once the debt is verified through a judgment, it will also need a writ of execution from the court before a garnishment can take place.

State Laws

Whether your lottery winnings can be garnished will depend on the state laws where you live. For example, in the state of Connecticut, case precedent has said that lottery winnings cannot be garnished. But states such as Colorado and Oklahoma have allowed money to be garnished from lottery winnings. You will need to check with your state's laws to find out if your money could be taken.

Payments

When you win a large amount of money in the lottery, you are typically given the opportunity to take a lump sum payment or to get regular payments over time. If you take the lump sum payout, the money is less likely to be garnished. This is a matter of timing. The creditor would have already needed to have a judgment from a lawsuit to get the garnishment by the time you take the payment. If you choose regular payments every year, a garnishment is more likely.

Levy

Even if you take a lump sum payment and the money is not garnished, your creditors could still find a way to get some of it. If you owe money and you have a judgment against you, the creditor could levy your bank account directly. This would involve taking some of the money out of your account without your permission. If the lottery money is deposited in your account, you could lose a portion of it to repay your debt.