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Selling Your Structured Settlement

Jun 7, 2008
Selling a structured settlement is not difficult but does require some research and thought on the part of the seller before committing to the structured selling process. First, we must define a structured settlement. A structured settlement is a legal contract between two parties to compensate one party in the contract a set sum of money paid out in installments over a given period of time. Usually these contracts are formed and agreed upon between the party that is being compensated and insurance companies or other entities that are required to make the payments.

Once the contract or sum is agreed upon, the party that is required to make the payments begins making payments in monthly installments. Often times these payments are made over years requiring the payee to wait years for the total amount. In some cases the monthly income is viewed as favorable by some. In other cases, the total amount in one lump sum may work better for the payee. Often, lump sum payment is not an option for the payee so they are forced to take a monthly installment payment plan over a set period of time.

Selling a structured settlement to an investor or company that specializes in buying notes, or paper, is an option for people that have been awarded structured settlements. In some cases, people that have structured settlements may experience financial difficulty or health issues that require them to liquidate their structured settlement quickly. Loss of a job or other income streams may be lost, prompting these people to sell their structured settlement. Sudden illnesses such as cancer or heart attack may cause long term disability and immediate cash is needed to meet monthly expenses as well as medical bills.

There are other reasons to sell a structured settlement although not as dire as the above reasons. Some people sell their structured settlements to free up cash to take a long dreamed of vacation. Others sell their structured settlements for home improvements or to buy the dream house they have always wanted. The reasons vary with some selling their notes to put their children through college or taking the lump sum cash investing it in other financial instruments to increase their return over time.

It should be noted that when selling a structured settlement, the total amount of the settlement will not be realized. Structured settlement buyers offer to buy these notes at a discount in return for lump sum cash to the payee. The settlement buyer is assuming risk in buying the note with the discount reflecting the amount of risk the buyer must assume. Many risk factors must be considered by the settlement buyer including the amount of the settlement and the financial worthiness of the payor. Companies that make structured settlement payments are not immune to insolvency and bankruptcy, so the buyer must consider these factors before purchasing a structured settlement.

Selling a structured settlement is not difficult and only a process that requires some serious thought and research. Considering your needs and the reason for selling the settlement should be foremost before initiating the process of selling your structured settlement.
About the Author
Phillip Hatley writes about many subjects in the financial industry including futures trading and structured settlements. For more information about structured settlements, please visit his structured settlements blog.
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