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Selling a Structured Settlement

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What Is a Structured Settlement?

If you are injured and file a personal injury lawsuit, you (the plaintiff) may be awarded a settlement award. In such cases, the plaintiff may have a choice of receiving the award in a single lump-sum payment, or in the form of monthly payments. With the second choice, the monthly payments may involve annuity payments, also called a structured settlement.

If you receive the structured settlement instead of a single lump-sum payment, you will receive your tax free payments over a period of years. Structured settlements may not always be available in all cases or in every jurisdiction. However, they are common for certain personal injury claims including, but not limited to: 

  • Automobile accidents
  • Slip and fall claims
  • Dog bites
  • Medical malpractice

Selling a Structured Settlement

Sometimes a plaintiff is allowed to sell their structured settlement to a financing company. There may be various reasons for the plaintiff to do this. For example:

  • The plaintiff may be “stuck” with a monthly payment allowance that doesn’t permit them to access the amount of money that they need. Or,
  • The plaintiff may be considering making a profit by selling their settlement.

The way that selling a structured settlement works is that the plaintiff will contact a financial company, or the company may contact them regarding the sale. The plaintiff will work out a sales agreement with the company that determines the terms of the sale through a contract that is enforceable under law.

The financing company will issue the plaintiff a sum of money in exchange for their structured settlement. This may involve the sale of the entire settlement, or just a portion of the amount. In any case, the plaintiff is then free to control the money that they receive from the company, instead of having to wait for monthly payments from the court-ordered structured settlement arrangement.

What Can I Do to Protect Myself When Selling a Structured Settlement?

First of all, it may not always be possible to sell a structured settlement under state and federal laws. It’s important to remember that about two-thirds of the U.S. states place restrictions on such sales, be sure that you aren’t violating any laws by selling your structured settlement. This can be done by seeking the court’s approval before attempting the sale.

Here are some tips that may protect you when selling a structured settlement:

  • Beware of fraud: Only choose to negotiate only with reputable finance organizations. 
  • Only sell what you need: You will have the choice of selling either all or only a portion of your structured settlement.
  • Beware of contractual restrictions: Be sure that you aren’t violating any contract terms that you agreed to.
  • Watch out for tax consequences: Receiving a large sum of money can lead to heavy tax consequences, which can spell an overall loss.
  • Shop around: Be wary of low offers. You may wish to inquire with several different companies in order to receive the best offer for your settlement

One of the best things you can do to protect yourself is to hire a financial consultant or a personal injury lawyer to advise you on how to proceed with a sale. In some cases, you might be better off sticking with the structured settlement plan that you originally received.

Do I Need a Lawyer for Help with Selling a Structured Settlement?

Selling your structured settlement is a major decision that can have potential benefits and drawbacks. If you are considering selling a structured settlement award, it’s definitely in your best interest to hire a personal injury lawyer for advice. Your attorney can help ensure that the sale conforms to the laws in your area. In addition, your attorney can help you file a lawsuit if a legal dispute arises over the sale of your settlement.

Photo of page author Nicole Shoener

, LegalMatch Legal Writer

Last Modified: 07-11-2018 02:08 AM PDT

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