Structured settlements help many injured individuals and their family with dependable income that they can live on after an accident. They also protect individuals who depend on the periodic payments for regular income and can no longer work after an injury. However, at times, the structured settlement is more of an investment, keeping beneficiaries out of direct access to cash they need to pay off an unforeseen expense or meet debt.
In order to sell structured settlement payments, an individual or his or her beneficiary must first obtain approval from the court. This is usually done through a notice of default that instructs the party to whom the money is owed to pursue collection efforts. Once the trustee issues a notice of default, this tells the recipient of the settlement not to use the money to settle debts unless it is paid in full. The person or entity paying off the debt typically requests permission from the person or entity that gave the lump sum to buy out the structured settlement payments.
Although there are several reasons why someone would sell structured settlement payments, the most common is to free up future payments. People may have an upcoming annuity payment due after receiving their settlement, and they may also need money for day-to-day living expenses while they are recovering. Other individuals may have to finance the purchase of a new home, and some may be forced to make large purchases such as vehicles. Whatever the reason, selling these payments presents an attractive opportunity.
Many people don’t know how much money is available in their structured settlement. There are several factors that go into deciding the value of the settlement. One of these factors is the present value of the amount of the payments. This is simply the amount of money that the settlement’s beneficiary will receive if it is successfully sold. The present value of future payments is figured by taking current interest rates and applying it to the expected amount of the payout. While this method takes into consideration the economic conditions of the time in which the structured settlement was given, it does not take into consideration the present value of the funds.
A factoring company is an individual or entity that finances future settlements. A factoring company buys future payments from insurance companies and medical providers. They then use this money to settle obligations. A factoring company buys a monthly minimum amount of money from these companies at a prearranged price. This is known as a cash settlement. If a person is currently receiving payments on an annuity or other type of structured settlement, a factoring company will buy those payments from them in order to resell them to companies and individuals who need them.
One of the best reasons to sell structured settlement payments is because of the potential to make a large sum of money. In addition to providing for future medical and dental expenses and income, these payments also provide a source of emergency funds. In the event of an emergency or if some unexpected crisis occurs, selling immediate cash payments allows individuals and families to be able to deal with the crisis and not wait for the funds to arrive in a timely manner. While it is true that selling to factoring companies can make it more difficult to get a loan, it is important to remember that most factoring companies require individuals to have a loan before they will pay out the agreed upon lump sum of money.