Structured settlements help many injured individuals and their families through offering reliable monthly income in which to survive after an injury. They secure people who may not be able to work immediately and rely on periodic income to make ends meet. However, at times, the structured settlement is simply a bank vault, holding owners out of receiving funds they must pay for unexpected medical expenses or settle outstanding debt. When this happens, the court may award funds to the claimant in periodic payments that decrease over time. If there are no current payout amounts to provide income, there could be future issues with creditors and other third parties if there is no one to receive these payments.
When lump sum payments are awarded to individuals, there is no assurance when they will be received. Even when payments are received, the recipient may have difficulty maintaining the lifestyle she or he is accustomed to. Many who receive structured settlement payments are demoted or laid off from their job. They may need to begin repayment of loan obligations with a much higher interest rate than the original agreement negotiated during settlement. Their income may also be reduced, putting further strain on monthly cash flow. The courts assigned a discount rate to compensate the defaulter for this situation.
With the recent economic hardships, many individuals who are receiving payment awards are asking the courts to allow them to sell structured settlement payments to for-profit companies. The companies buy these payments from injury plaintiffs and receive a lump sum payment in return. However, not all holders of these payments are comfortable selling to third parties and may want to retain control of their payments. There are risks involved such as having the money invested in a for-profit company that does not succeed and possible tax liabilities when you sell Structured Settlement payments. Keep in mind, some of the fees involved in selling your structured payments to for-profit companies may be considered an income by the IRS.
One of the concerns most individuals have regarding selling their structured settlement payments to for-profit factoring companies is whether they will lose control of their payments and face repossession. Some companies will offer a three-month grace period following the sale, during which time you can pay the lump sum and avoid seizure. However, you must know how long the factoring companies will keep the money you pay them. Some companies will allow you up to one year to pay the amount owed, but in addition, you may face additional charges. Some factoring companies will add late payment penalties and application fees to the actual amount owed on your loan.
Another concern that some people have regarding selling their structured settlements to for-profit factoring companies is the potential loss of control over their future. Your injury lawyer will work with you to make sure you receive a lump sum payment from the insurance company. You will make regular monthly payments to the insurance company and your lawyer will distribute the lump sum payment. The factoring company will use the money received to buy other payments from the injured party’s insurance company.
If you are unable to continue to make your required payments, your lawyer can help you work out an alternative payment schedule that takes effect once your original settlement has been paid in full. The payments to be made may come from your own bank account or another account that is given to you by your insurance company. The insurance company’s goal is to receive the entire structured settlement in a lump sum payment. The structured settlement will be paid in a timely manner and the injured party will not face repossession of their property until all of the necessary payments have been made.