Process of Selling Structured Settlement Payment Rights

Large sums of money awarded to a plaintiff in a personal injury, workers compensation or other tort claim is usually given in the form of a structured settlement. This allows the insurance company to pay the claimant a specified amount every month, quarter or year instead of giving a lump sum. For the recipient of this structured settlement to get a lump sum of money for purchasing a home, paying college tuition or other important reason, they have the right to sell all of part of the structured settlement to an investor.

The Structured Settlement Protection Act of 2002 mandates that the seller must get a judges approval in order to sell. This protects the claimant from unscrupulous financial investors who may use their superior financial knowledge to take advantage of claimants. In the past, they often created contracts for buying the settlement that only favored them and put the claimant into financial difficulties. It also protects the claimant from using the money in a frivolous way and endangering their own and their dependent’s financial future.

There is a clear process for selling a structured settlement:

The current value of the structured settlement is the amount an investor is willing to pay for all the future payments. The present value can be found by using structured settlement calculators online.

It is important to know that it is possible to sell only part of the structured settlement for a lump sum and continue to receive payments in the future.

Once aware of the possibilities, it is time to find a buyer. There are excellent websites that offer sellers the opportunity to have multiple buyers bid on structured settlements. In this way it is possible to choose the best one. It is also possible to find buyers by asking investment firms, banks or through classified ads, but the online bidding sites offer a better chance of getting the best price.

Once a short list of buyers is achieved, each company should be investigated to make sure they are licensed, bonded and insured and recognized by the Better Business Bureau. If, for any reason, the company goes out of business, the seller will still receive the money agreed upon. It is also good to know the past payment records and reputations with insurance companies.

When the buyer is selected, the contract documents are signed and notarized. The buyer must inform the seller that they need to consult an unbiased financial adviser or lawyer. Along with the lawyer, the request is filed with the local court. This can take from 3 to 5 weeks. A hearing will be scheduled where the lawyer and possibly the seller will attend.

The seller will need to explain to the judge why they want to sell the structured settlement and the judge will need to approve these reasons. He or she must agree that a lump sum of money is important to the future of the seller.

If the judge agrees, the documents will be signed and released. These documents will be sent to the insurance company who has also been informed of the possibility of the sale. The seller will then receive their money by wire transfer. The whole process usually takes between six weeks to three months.

The advice of a lawyer is invaluable at this time. There are tax issues involved with receiving a lump sum that need to be understood. A percentage of the money will be given for tax purposes before it ever reaches the seller. If the sum is very large, this could put the seller into a higher tax bracket that will cause financial distress later.

Posted in Structured Settlements