News and Tips on structured settlement transfers.

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Structured Settlements and Bankruptcy

Meeting everyday expenses can be difficult enough, but it’s even worse if you’ve been hurt in an accident and have medical bills and other expenses.  This is one of the reasons why structured settlements are so popular in personal injury lawsuits.  A defendant can set aside a lump sum of cash that is then put into an annuity and invested.  The annuity makes regular payments to the plaintiff to help with those expenses.

But even with a structured settlement, you still may not have enough income to pay all your bills, and may find that you have to declare bankruptcy.  If so, what happens to your settlement?

The good news is that most states exempt structured settlements from bankruptcy proceedings.  So, even though your other assets – if you have any – might be at risk, your settlement will be intact.

This is not the case if you sell all or part of your settlement for a lump sum of cash.  Once you do that, it is up for grabs if you happen to go into bankruptcy.  Of course, it is more likely that you would spend the entire lump sum before going into bankruptcy.  If this is the case, the money is gone, as is the structured settlement.  This is one of the many reasons you should give long, hard thought to any decision to sell a structured settlement.

In addition to its protection from bankruptcy, you should also consider the other benefits of structured settlements:

Invested by Professionals.  Structured settlements are usually administered by insurance companies, who have professional investment advisers working to put those funds where they will earn interest sufficient to make your payments.  So, if an investment “expert” promises that you can do better by letting him handle your money, keep in mind that you already have a professional taking care of it for you.

Tax Advantages.  As long as your structured settlement is for a personal injury (as opposed to punitive damages), it is exempt from income tax.  So is the interest that is earned on your annuity.  If you sell your structured settlement for a lump sum and then invest it, those interest earnings are fully taxable. 

Spendthrift Protection.  The periodic payments that you get in a structured settlement prevents you from spending all of your money too quickly.  Most lump-sum payments are obliterated within five years, and the plaintiff is left with nothing.  A structured settlement protects you from yourself.

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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