It might be appropriate for you to sell all or a portion of your future structured settlement payments in order to get a lump sum of cash for an emergency expenditure, such a sizable medical bill or critical house repairs.
This deal is sometimes referred to as a structured settlement loan. However, that statement is untrue because a structured settlement loan does not exist. Structured settlements cannot currently be pledged as collateral for loans due to legal restrictions.
To ensure that you understand every step of the selling process for your structured settlement, we have provided a thorough explanation.
Analyse Your Needs
Step 1:
Determine the amount of cash you require and the portion of the structured settlement you wish to sell. Remember that the entire amount of the payments you would eventually receive would be greater than the sum you would receive from a business that bought the rights to the payments. Because the business will incur administrative and legal expenses. Profit is another goal of the business.
The buyer, or factoring business, may give you a lump sum that is between 60% and 80% of your total future payments, however, it may be as little as 50%. Therefore, if your structured settlement pays you $1,000 per month, you may sell each payment for between $500 and $800.
With that in mind, think about how much money and how long you’re willing to give up. Typically, just a portion of a structured settlement is sold. Instead, they sell a portion of the money they receive. They can choose to sell the equivalent of six months’ worth of payments, which would prevent them from receiving a regular income from their structured settlement during that time.
They could also decide to sell half of their payments for a year if they wish to keep receiving their normal payments for those six months.
You decide the proportion and duration. You should determine what would be best for you after thoroughly assessing your financial circumstances.
You may choose to sell six months of the money, or $6,000, in the case of $1,000 monthly payments. Your structured settlement would not pay you anything for those six months in that scenario. Once that period was through, you’d once more start getting $1,000 every month. Depending on the offer, that arrangement can result in a lump payout of anywhere between $3,000 and $4,800.
The amount would remain at $6,000 if you choose to sell half of your payments for the following year, but you would receive $500 monthly payments in this case rather than $1,000. Your $1,000 monthly salary would restart after the initial six months.
The buyer’s ability to get the money may be delayed by the legal procedures of selling a structured settlement, which could affect the final offer.
Make sure you sell enough payments to pay off any obligations you must. If you sell too little, you’ll have to start the procedure over and go before the judge again to request more money. In that case, the judge might have concerns about your financial management skills and might be less inclined to allow the second transaction.
Identify Quotes
Step 2:
For a price estimate, get in touch with the business that will make the purchase, often known as a factoring company. You can find out from this how much the business will pay for your payments. To be sure you’ve selected the best factoring company, it’s frequently a good idea to request quotes from multiple purchasing firms.
Checking out the Better Business Bureau ratings for businesses is a good idea.
Make sure all the fees and commissions the businesses will need you to pay are specified in writing in each offer. It is best to approach each deal with an open mind. You’ll have a better sense of how much money you can collect for your payments after getting quotations from businesses. With this information in hand, you might wish to go back to step one.
Identify Your Options
Step 3:
Examine the offerings side by side. Before accepting any offer, read the fine print and familiarise yourself with the terms. Ensure that the company you choose is comfortable working with you and that all of your questions have been addressed. Ask someone you can trust to help you consider your options if you’re unsure. Don’t be afraid to enquire further.
Make sure the factoring companies are reliable by conducting further research. Examine their websites, speak with their representatives, and research the trade associations they are a part of. Choose the option that best suits your needs once you’ve completed all of your homework.
Examine the offerings side by side. Before accepting any offer, read the fine print and familiarise yourself with the terms. Ensure that the company you choose is comfortable working with you and that all of your questions have been addressed. Ask someone you can trust to help you consider your options if you’re unsure. Don’t be afraid to enquire further.
Make sure the factoring companies are reliable by conducting further research. Examine their websites, speak with their representatives, and research the trade associations they are a part of. Choose the option that best suits your needs once you’ve completed all of your homework.
Select the Company
Step 4:
Select the best offer, fill out the papers, and sign it.
The necessary paperwork consists of:
- two different kinds of identification
- A completed application
- A copy of the initial structured settlement and release agreement
- a copy of your annuity contract
After completing this phase, you’ve formally consented to sell your payments.
Ask for an advance
Step 5:
To get cash right away, request a cash advance. You will receive a portion of this payment—roughly $1,000—to tide you over until the procedure is finished. Your lump sum payout may not arrive for three months.
Show up in court
Step 6:
Obtain a court order. Although it may seem scary, this is not. You will appear before a judge in your county after having all the necessary preparations and paperwork prepared by the factoring business you are dealing with. In order to convince the judge that this transaction is in your best interest, you will be asked several questions. The law requires that something be done. The welfare and support of your dependents will be taken into account by the judge while determining whether to approve the sale, among other things.
You must provide a copy of the order to the structured settlement administrator as soon as the court grants permission for the transaction.
Get Your Money
Step 7:
As outlined in your contract with the factoring provider, receive complete payment. After the court gives its consent, this usually occurs three to five business days later.
Before you may get your lump payment, any outstanding debts such taxes liens and unpaid child support will be deducted.
