How do structured settlement companies work?

When the defendant and plaintiff agree to resolve a lawsuit with a structured agreement, the parties negotiate a cash amount payable by the defendant in exchange for the plaintiff to withdraw the lawsuit. The money is distributed as a series of periodic payments, usually financed through an annuity. Structured settlement purchasing companies, also known as factoring companies, provide services to those who sell their structured settlement payments. These companies offer deal owners lump sums of cash in exchange for rights to future payments or parts of future payments.

These transactions between the holder of the settlement annuity and a third party are what is called a secondary annuity market. You should also check if the company is a member of the National Association of Settlement Purchasers. The settlement is then spread out into a series of periodic payments over an agreed period of time rather than a one-time payment in most cases. Structured settlement payments are secured and irrevocable; however, annuity settlement options may differ from typical revenue contracts.

Federal law requires a judge to rule that the proposed transaction is in the best interest of the agreement holder. Structured settlements are tax-efficient and can also have wasteful and asset protection advantages. However, instead of a one-time payment, some plaintiffs choose to have their compensation paid in a structured settlement. Congress has provided an opportunity for injury victims to receive guaranteed periodic payments as part of their personal injury settlements.

When people looking to sell their payments contact businesses, they collect information and calculate an offer for the specified payments. If the state uses the equitable distribution method and the agreement was obtained before marriage, the agreement is likely to stay with the owner of the agreement. Typical settlement scenarios include a personal injury case, a workers' compensation case, medical malpractice, and wrongful death lawsuits. Look at company websites and make sure there is a direct phone number that connects you to someone who can answer your questions as you go through the process.

When a plaintiff receives a lump sum settlement, they may spend it too quickly, depriving them of the long-term financial security that future payments could provide. If you find that your expenses increase while you wait for your first structured settlement payment or initial lump sum, you may want to consider pre-settlement financing options to help you.

Minnie Wuestenberg
Minnie Wuestenberg

Total pop culture nerd. Hardcore twitter guru. Incurable foodaholic. Hardcore troublemaker. Friendly coffee lover. Unapologetic food junkie.

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