Pedro Quezada recently won a $338 million Powerball jackpot and began his life as a millionaire by — paying $29,000 in overdue child support payments.
Most people who dream of winning the lottery don’t imagine spending their new treasure to settle their debt. But sometimes, Lamborghinis and lavish living have to be put on hold briefly in order to pay overdue bills.
Quezada — and his kids — got lucky. Most noncustodial parents aren’t so lucky, and need to pay child support without the lottery’s help.
The Story of Quezada
Quezada is a 44-year-old from Passaic, N.J., and the father of five children, ages 5 to 23. His unpaid child support debt, known as arrears, goes back to 2009.
His family struggled financially in the past few years, as there was a fire in his business in 2009, and thieves broke into his apartment in 2011.
His luck turned recently, however.
Quezada chose to receive the money in one lump sum, instead of annual payments for 30 years, which means he gets $211 million ($152 million after taxes). That’s the third largest lump sum payment for Powerball.
Here’s the catch: New Jersey state law requires that lottery winners receiving payments of more than $600 undergo background checks for owed taxes and child support. So, after collecting the winnings, Quezada was immediately responsible for paying the debt; otherwise he could have been arrested.
On Monday, Quezada appeared in state Superior Court in Paterson and settled his child support debt for $29,000.
Lottery Winners and Debt
Quezada’s story — where a lottery winner must fork over some of the jackpot to cover unpaid child support – is not the first of its kind.
Other lottery winners in the same situation have not settled their debts so quickly, however.
Amador Granados, from Anaheim, Calif., won $11 million in 1999, and after a long legal battle paid $109,608.53 for past due child support. If he stops paying again, authorities say they will again go after his lottery money, which he receives in annual payouts.
Another winner in the mid-1990s received more than half a million dollars a year, and the family support division intervened to make sure child support was paid.
Child Support Debt
The Office of Child Support Enforcement says around $100 billion in unpaid child support has accrued since 1972, when the national child enforcement program began.
Also, there are around 6.8 million custodial parents with child support agreements in place in the United States, according to the Census Bureau; more than a fourth of these sought assistance from the government in collecting child support payments.
With this type of hardship affecting so many families, 29 states have created debt compromise policies, which means the state may settle child support debts for less than what is owed. Another 17 states consider past-due accounts on a case-by-case basis.
The bottom line is that parents can’t count on lottery winnings to bail them out; they need to start paying child support today. If they don’t, they could be saying goodbye to state or federal tax refunds – or even see their paycheck shrink as a result.
Alanna Ritchie is a content writer for Debt.org, where she writes about personal finance and little smart ways to spend (and save) money. Alanna has an English degree from Rollins College.