Why Sell a Structured Settlement
First, lets consider the type of structured settlement
that might be sold. Generally, this settlement arises after
a person is injured in an accident. He or she files a personal
injury lawsuit and wins the case in court or through a settlement
agreement (no trial). Many times, the injured party would
receive his money through a structured settlement, receiving
payments over a period of time in exchange for releasing
the other party and their insurance company from further
liability. Structured settlements are like bank certificates
of deposit, or annuities, where you have the right to money
but not right away. Instead, you will receive your money
at on an agreed time schedule.
There are many good reasons for the injured party to settle
in exchange for a structured settlement, instead of receiving
a lump sum amount. Having a guaranteed periodic income may
seem like the best arrangement at the time but sometimes
circumstances change. For example, the individual may face
unexpected financial needs, such as medical expenses, debts,
new business opportunities, the need for a different home,
or other pressing circumstances. In those situations, the
person can sell his or her structured payments to a structured
settlement purchaser in the business and get cash up front
rather than over years to come.
Many states in the U.S. have laws that allow sales of structured
settlements but with an eye to protecting the sellers (the
party who was injured) so they are not taken advantage of.
When a person wants to sell his or her structured settlement,
the prospective seller contacts a possible buyer and sends
to the buyer documentation about the insurance company's
name and settlement payment plan. Based on this information,
the buyer provides a free quote. Then an interested seller
can send a copy of his structured settlement policy and
the settlement agreement, for more detailed review by the
buyer. The buyer will write an agreement to be signed by
both the seller and the buyer. This agreement would next
be submitted to the court for approval, along with an application
for selling the structured settlement. The court reviews
the application to decide if it is in the best interests
of the applicant, and gives approval if appropriate. This
court review is generally the buyer's responsibility. Typically
this court process takes about 2 to 3 months, depending
on the particular state's laws.
According to Federal and state transfer acts, only personal
injury settlements can qualify as structured settlements.
Workers compensation awards are treated differently and
are not sold.
For prospective sellers of structured settlement, you need
to proceed cautiously. The buyers are experts at this process,
but you probably have never sold a structured settlement
before. The court approval process can be an important part
of your protection, and you should stay involved in this.
In fact, for some people, it is better to keep the structured
settlement in place for a guaranteed income, instead of
selling the settlement and accepting a lump sum. While selling
your structured settlement can help meet major financial
needs, this is a serious matter and you should get your
own legal advice.
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