Based on recent news about the secondary real estate market for structured settlements, you already know that transferring your future payments from your structured settlement to an investor who promises a lump sum payment is perfectly legal. But understanding that you can actually sell your future payments means that you shouldn’t. The law doesn’t allow you to cash out your settlement payments until they become payable. As such, it’s not like you can walk away from your settlement obligations without paying anything. But what if there were an opportunity for you to sell the future payments for a lump sum amount while keeping your settlement? Is this legal?
It depends. You see, when you sell a structured settlement, you’re basically transferring all of your obligations under the plan to an investor. The investor is then obligated to pay you a lump sum amount and distribute the remaining balance over time. The problem with this is that instead of receiving monthly or annual payments, you will instead receive a one-time payment.
In order for this type of arrangement to be legal, the terms of transfer must adhere to federal and state laws. For example, your original lawsuit plaintiff must give you 60 days notice prior to selling structured settlement payments. This gives you enough time to find another buyer for your payments. The court date that you originally filed suit against your original lawsuit defendant is the only time that this sale is allowed. The exception to this rule is if the bank that you received the payments from permits a sale of the payments in the event that you become insolvent.
What does this have to do with selling structured settlement payments? Essentially, you would need to find a factoring company in order to make the sale. A factoring company is a financial institution that purchases a percentage of all of the future payments that you and your original lawsuit plaintiff are owed. By law, they are not allowed to charge interest on these payments. Instead, they are paid a lump sum amount at the beginning of the settlement. Once the lump sum amount has been received, you would then send a letter to your original court date demanding that they grant you a one-time settlement payment equal to the full amount of the factoring payment.
Once your letter of demand is received, the factoring company would then begin the selling process. The entire process can take up to three months to complete depending on how fast the settlement claims are currently moving. During this time frame, you would make one small monthly payment to the factoring company in exchange for the right to sell structured settlement payments from the annuity. At the end of the three month period, your annuity would be completely paid off. During this time frame, the discount rate of the annuity that you purchased would be locked in at a fixed rate.
While it may seem like the whole process of selling structured settlements to factoring is extremely complex, it’s actually very simple. The most important factor of all when deciding to sell structured settlements is the discount rate of the annuity that you are purchasing. If you are unable to purchase a better rate during this initial process, it will be extremely difficult if not impossible to get any better rates later on down the road. To make things even easier, the more money that you are able to save on your annuity by purchasing from a factoring company the better your chances are of never having to deal with this hassle again. You are basically paying someone else to do your dirty work while you continue to live your life normally.