If you are receiving structured settlement payments from a personal injury lawsuit, you may consider selling those future annuity payments for a lump sum of cash now. Structured settlements provide guaranteed, long-term income, often with built-in annual increases, that can help meet ongoing medical expenses and basic living needs. However, sometimes life circumstances change, and immediate access to a larger sum of money becomes necessary.
While selling future structured settlement payments is an option, it’s a significant financial decision that shouldn’t be made lightly. As a leader in purchasing structured settlement payments, we at Fairfield Funding want to ensure you have all the knowledge before deciding if selling your structured settlement annuity is right for you.
What To Know About Cashing Out A Structured Settlement?
Here are the five facts you need to know before selling your structured settlements:
1. The Structured Settlement Selling Process Takes Time And Requires Court Approval
One of the most important things to know is that selling your structured settlement payments is not an overnight process. Unlike a typical financial transaction, you can’t just sign some papers and get your money immediately.
The sale of structured settlement payments must be approved by a judge to ensure it is in the best interest of the seller. This court approval process can take anywhere from 30-90 days, sometimes longer. The judge will review the terms of the sale and may ask you to explain your reasons for selling your annuity payments and how you plan to use the money.
Because of this time frame, it’s critical to plan ahead as much as possible if you are considering selling your annuity payments. Don’t wait until you are in a desperate financial situation. Explore your options early so you can make a careful, considered decision. Rushing the structured settlement factoring process could lead to making a choice that isn’t ideal in the long run.
2. You Have Various Options Of Settlement Purchasers And How Much Of Your Future Payments You Want To Sell
When selling structured settlement payments, it’s not an all-or-nothing proposition. You don’t necessarily have to sell all your remaining payments if you only need a certain amount of cash.
Discuss your financial needs with the structured settlement buyer to determine the right option for you. In some cases, selling a specific number of payments or portions of each payment might provide the cash you need while still allowing you to retain some of your long-term income stream.
Getting quotes from multiple structured settlement buyers will allow you to compare your options and find the best fit. Look for a reputable factoring company with experience in buying structured settlement annuities. Ask for referrals and check online reviews. Don’t just go with the first offer – make sure you understand all the terms and that you are getting a competitive deal.
3. There Are Costs Involved In A Structured Settlement Sale
It’s important to recognize that selling future structured settlement payments does come at a cost. You will not receive the full value of your remaining payments. Structured Settlement buyers make their money by purchasing payments at a discount rate.
What Is A Discount Rate?
The discount rate is like the inverse of the interest rate you would pay on a loan. While you are “cashing in” your future payments, the buyer has to wait months or years to collect that income. The discount rate compensates them for that time to get the present value of your structured settlement payment. Rates can vary significantly, often ranging from 6% to as high as 29%.
The lower the discount rate, the more cash you will receive. However, be wary of any company promising an extremely low rate that seems too good to be true. This may be a red flag for other hidden costs. Make sure you ask detailed questions about the total cost and if there are any additional fees. Get all quotes in writing.
Also, remember that once you agree to sell, all those structured settlement annuity payments are gone for good. Make sure you have a solid plan for the lump sum payment you will receive and that you aren’t putting your long-term financial security at risk by selling too many. Consult with an accountant or financial advisor who can help you determine if the cost of selling structured settlement annuities makes sense for your situation.
4. Reasons Judges May Deny To Sell Structured Settlement
As part of the court approval process, a judge will review the terms of the sale and determine if it should be allowed to proceed. It’s important to understand that the judge can deny the sale request for a few key reasons:
The judge wants to ensure that you aren’t being taken advantage of or making a short-sighted decision. You will need to demonstrate that you have a legitimate need for the cash and a plan for using it wisely. If it appears you are being pressured to sell or are likely to end up in a worse financial position, the judge may deny the sale.
Wanting extra money isn’t enough of a reason. There must be a compelling financial need, such as paying off high-interest debt, avoiding foreclosure or bankruptcy, getting necessary medical care, making home repairs, paying for education, or funding a reliable vehicle to get to work. The judge will require documentation of your expenses and financial situation.
The judge wants to be sure you fully comprehend what you are agreeing to, including the costs involved and the long-term impact of selling your payments. If there is concern that you are confused or are being misled, the sale will likely be denied.
To improve the odds of your sale being approved, work with a knowledgeable, structured settlement buyer who can help prepare a thorough, well-documented petition for the hearing. Make a clear case for why the sale is needed and in your best interest.
5. When Is The Right Time For Selling Your Structured Settlement Payment Rights?
While selling structured settlement payments isn’t the right choice for everyone, there are times when it can be a smart financial move to get lump sum cash. Here are some examples:
Sometimes, life deals an unexpected blow, such as a job loss, major unanticipated medical expenses, or the need for a new roof or vehicle. If you don’t have an emergency fund or other means to cover those critical costs, selling some structured settlement payments can provide much-needed relief.
If you are drowning in credit card or other high-interest debt, selling some settlement payments to become debt-free could put you in a better financial position moving forward. With debt burdens lifted, you can begin to save and rebuild your safety net.
Structured settlement payments can be a path to reaching key milestones like buying a home, paying for education to boost earning potential, or starting a business. Weigh the long-term benefits and opportunity costs carefully.
Ultimately, the decision of whether to sell comes down to your unique circumstances, needs and goals. It’s not a choice to make impulsively. Consider all the angles and get advice from people you trust.
Conclusion: How to Sell Your Structured Settlement?
Structured settlement payments provide important financial security for injury victims. If you are considering selling your payments for immediate cash, do your homework to understand the process, costs, and implications.
Make sure you weigh the options carefully and only sell what you truly need so you don’t put your future income stream at risk. Choose an experienced and reputable structured settlement buyer and compare quotes to ensure you are getting a fair deal. Understand that the court approval process takes time.
Fairfield Funding is here to answer any additional questions you have about selling your structured settlement payments. We’re committed to transparent, ethical service to help you make a decision that’s right for you!
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