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Selling Your Structured Settlement Payments & Long Term Considerations

If you need to get cash by selling your structured settlement payments, there are some important matters that you should be concerned with. The long term cost of selling your structured settlement for a lump sum payout are substantial. Most people don’t take these costs into consideration and only focus on the immediate impact of a large cash windfall.

If you finally do decide to go with a structured settlement brokerage company this what you need to know about the law.

If you’re in a lawsuit, some services “offer” you the ability to “sell” your structured settlements to them. In exchange, they provide you with a lump sum of cash in the event you need this type of financial resource.

Laws do protect consumers from brokerage companies that are unscrupulous. Most often, the settlement agreement also specifies a non-assignability clause. Basically, this is unenforceable, though.

Some of the purchase agreements require the consumer to stipulate to a host of provisions which severely restricts consumers rights and raises questions as to their basic fairness. To forestall suit, however, the contracts often require the consumer to defend and hold harmless the purchasing party in any lawsuit.

The price terms usually unfair. Summary accounts show that some sales are completed with a 12 percent or 15.8 percent discount rate, but other sales have been completed with a rate as high as 55, 65, and 75 percent. In addition, since the discount rate is always calculated on the purchase price which includes brokerage and other expenses “agreed” to by the seller in the contract, the real discount rate and cost of the transaction to the seller is artificially depressed. Moreover, there is no requirement to disclose to the seller, in understandable terms, the total fees of the transaction. Given the unfairness of some of the transfer agreements, consumers need protection from factoring companies that take unfair advantage.

Some say that structured settlements give financial protection that’s sorely needed to severely injured victims, so that they are protected from having their benefits prematurely dissipated; periodic payments are tailored to the medical and living expenses of the victim and the victim’s family, and it avoids shifting the responsibility for the victim’s care to the social safety net financed by taxpayers. These same people say that factoring companies that purchase future structure payments for sharply discounted lump sum payments are dramatically on the rise. This means that the structure is taken out of the structured settlement, in that the injured victim enters into this with a third party, thus going completely outside of the structured settlement without knowledge of any other parties involved in the structured settlement itself.

According to industry watchdogs, the unscrupulous side of the structured settlement factoring business is rapidly growing. One company announced that it has undertaken more than 7,700 structured settlement purchase transactions with a total value of $370 million. During the first nine months of 1997, the same company undertook more than 3,700 structured settlement purchases paying $74 million for $163 million of structured settlement payments.

What that means is that the long-term financial security and careful planning so painstakingly set up to take care of the needs of the injured victim and his or her family are being tossed aside. This is all because factoring companies offer quick cash at deep discounts for future structured settlement payments — but at what cost? Once these victims have given away their only source of assured future financial income, they may indeed have to go on public assistance to cover future basic living expenses and medical expenses — even though this is what the structured settlement plan was set up to avoid.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.

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