Can you sell structured settlement payments? And if so, how?
The short answer to this question is, ‘yes’, but there are some very important points to be aware of, should you be considering this step. Although you may not use your structured settlement payments as collateral for a loan (this would directly conflict with the tax-free nature of your periodic payments), it is possible for you to enter into a transaction with a purchaser. A structured settlement buyer is a financing company that offers a lump sum of money in exchange for some or all of the claimant’s future payments.
This can seem very attractive when there is a change of circumstance for the recipient of the structured settlement. Perhaps there is a crisis in the family, or a child is going to college, or another family member has become ill. Suddenly, the thought of having a large sum of money is highly tempting.
The first thing someone in that situation should know, is that they are not going to get anything even close to the remaining value of their settlement payments. Many clients come away with 50%, or even less. Knowing this upfront can prevent confusion, disappointment and heartache.
The second vital piece of information for a potential seller, is that there are solid, reputable structured settlement funding providers, and there are also fly-by-night, unscrupulous firms that actively exploit people in their hour of need. 47 states and the federal government have enacted stringent structured settlement protection statutes to police these ‘structured settlement factoring transactions’. Nevertheless, it is still up to you to protect yourself. Federal law requires court oversight and approval for any injury victims who decide to sell structured settlement payments to a third-party entity. Knowing that simple fact is the first step to making sure you don’t fall prey to cutthroat frauds.
For a start, do your homework, and assure yourself that the business that is quoting you has a squeaky clean reputation. Check them out online, and through consumer forums. Pay attention to their attitude from the very first contact. Are they patient and willing to explain every step to you in detail? Reputable finance houses make their money from the actual deal, and have no need to confuse their clients. On the contrary, a good service provider will suggest that you consult an attorney, and will make every effort to educate you thoroughly regarding your options, the process, and the expected outcomes.
Once you’ve made contact, and you’re satisfied that the structured settlement buyer is experienced and professional, then you will request a quote. At this point, they will evaluate your structured settlement, and determine precisely which offer they are willing to make, on what terms. This is the time to be clear as to your needs. Perhaps you wish to retain some payments in the future, and only sell a portion of the structured settlement payments. The buyer will discuss the options available to you, and help you to decide on your personal course of action. At this point, you are free to change your mind and stop the process, and indeed, some clients choose not to accept the lump sum offered. This is a big decision that must be weighed carefully. Get all the good advice that you can, perhaps from your attorney, or possibly the state attorney that originally handled your structured settlement. And talk to a trusted family member or friend who is not personally invested in the financial outcome of your decision, someone who will not directly benefit from your pay-out. Sadly, dollar signs in the eyes can temporarily cloud even a loved one’s vision, so be careful whom you listen to.
If you choose to accept the offer, you will now have to sign the relevant documentation, which must also be notarized and returned to the structured settlement funding provider. Having signed, you are now legally bound by the terms of this new contract. The buying company proceeds to setting a court date with a local attorney from your area, and verifies payments with the insurance company that is responsible for your periodic payments.
It’s now a waiting game, until the court approval comes through. How long this takes varies from state to state, and sometimes there are unexpected delays, so don’t set your heart on a particular date. In general, though, the entire process takes from 3 to 8 weeks, after which the structured settlement buyer (in possession of the court approval) releases the agreed funds to the client. With that, the transaction is complete, and it is not possible for you to change your mind and try to get your payments back at some future point, if all the legal steps have been correctly adhered to.
No-one would deny that swopping monthly periodic payments for a lump sum can be the right solution for many people. However, the important thing is that you make sure that this really is the right solution for you and your family, and that you understand that the decision is irrevocable.