Yes, you can sell your structured settlement, but the process is tightly regulated and requires court approval to make sure the sale is in your best interest. You may also sell only part of your structured settlement if you need immediate cash but still wish to receive some regular income.
Whether you choose to sell your structured settlement is a highly individual decision. If you are currently involved in a lawsuit, consider personal injury pre-settlement funding to help you cover costs and make ends meet.
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What Is a Structured Settlement?
A structured settlement is a financial arrangement where you can receive compensation from a legal claim through scheduled payments over time instead of a single lump sum. These settlements are commonly used in personal injury cases.
Payments can be made monthly, annually, or at specific intervals. They are often funded through an annuity purchased by the defendant or insurance company. Structured settlements are typically tax-free in the United States when related to physical injury or illness.
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Can You Sell Only Part of Your Structured Settlement?
Yes, it is possible to sell only a portion of your structured settlement. However, it depends on the terms of your settlement agreement and the regulations in your specific state. Selling part of your settlement gives you access to cash while retaining some monthly payments.
Selling part of the settlement may involve negotiating with buyers and obtaining court approval for the portion being sold. It can be a sensible compromise if you need funds immediately but want to maintain a safety net.
How Do You Sell a Structured Settlement?
Selling a structured settlement involves transferring some or all of your future payments to a settlement purchasing company in exchange for a lump-sum payment.
Most sellers follow a similar general process:
- Choose whether to sell all or part of your structured settlement.
- Contact several structured settlement purchasing companies to see what each one offers.
- Review the details, including the discount rate, any fees involved, and the total cash amount you’ll receive.
- Choose the buyer that feels right for you.
- Begin the court approval process, where the buyer prepares and files the required legal paperwork.
- Attend the court hearing, during which a judge reviews the transaction and decides whether to approve it.
- Get your funds, which are paid out once the court gives its final approval.
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What Are the Benefits of Selling a Structured Settlement?
If you have a structured settlement and need cash now, selling can provide several benefits that could make sense for you, depending on your personal and financial circumstances. The biggest advantage is that it gives you immediate access to a lump sum of cash.
You can take care of large expenses and debts. Selling your structured settlement can also relieve the stress of relying on fixed periodic payments. It can simplify personal finances by converting a long-term, complex payout into a manageable sum.
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What Is the Downside of Settling a Structured Settlement?
While selling your structured settlement for immediate cash can seem attractive, it may not be the wisest choice for everyone. The primary drawback of selling your structured settlement is that companies purchasing settlements typically offer less than the total future value.
Selling also eliminates a guaranteed stream of income, which can impact your long-term financial stability, particularly if you are relying on steady payments for living expenses or medical care.
There are also legal and administrative hurdles, including court approval and documentation requirements, which can be time-consuming.
Why Do You Need Court Approval to Sell a Structured Settlement?
Structured settlements are meant to provide long-term financial security. Court approval is required to protect the seller and ensure the process is fair. Sales without court approval are subject to penalties for the buyer under 26 U.S.C. § 5891,
The court reviews each proposed sale to make sure the seller fully understands the financial impact, including the potential loss of future payments. Judges also confirm that the transaction follows state laws and is free from any form of fraud or coercion.
What Are the Alternatives to Selling a Structured Settlement?
You may have options besides selling your structured settlement. Some alternatives to selling could include:
- Taking out a personal loan or line of credit
- Negotiating with creditors for better payment terms
- Using savings and investments to meet immediate financial needs
It is important to discuss the potential impact of your choices with an attorney and financial planner to make sure you fully understand the effects of your preferences.
Should You Sell Your Structured Settlement?
You can sell all or part of your structured settlement, though you will need to comply with specific regulations and seek court approval. Whether or not it is a smart decision for you depends on your personal financial needs, now and in the future.
Pegasus Legal Capital has provided more than $500 million in legal funding for people involved in lawsuits. Call today for your free consultation and learn more about our non-recourse, pre-settlement funding.
Your pre-settlement funding consultation is free — contact us today!