Selling Structured Settlement Payments for Cash (Step by Step Guide)

The Process of Selling Settlements

The process of selling settlement payments is streamlined, especially once you identify an experienced buyer to work with.

Research and obtain quotes from multiple factoring companies
Choose a credible company that has given you the best deal
Accept the offer and complete the paperwork
The company will arrange for a court date, so a judge can approve your structured settlement sale
Following court approval, the order is sent to the insurance company and you’ll receive your money from the buyer.

From beginning to end, the process is typically 1-3 months, largely depending on how quickly the court hearing is scheduled.

Remember that the judge is there for your protection. They’ll make sure there really is a strong benefit of selling your structured settlement and review the offer from the buyer to make sure it’s a fair one.

Selling a Settlement: Is It Right For You?

There are many reasons to sell structured settlement payments. For many, they need cash to pursue goals and opportunities of a lifetime. The following are some common reasons:

Pay medical bills

Pay down high-interest debts

Pay for college education

Make a down payment on a home

Purchase a car

Start a business

Invest for retirement

As an annuitant, the decision to sell your settlement payments is very important and should be made carefully.

Determine how much cash you need beforehand. Creating a plan ensures you use the money wisely, rather than just using it on things that don’t enhance your financial security.

Your Sale Options: Full vs. Partial

If you decide to sell your lawsuit settlement, you are not required to sell all payments at once. Instead, you can sell your settlement in part or in full based on your financial needs.

Many people decide to sell only a specific number of their future payments. By doing this, they will resume receiving payments in the future. You also have the choice to sell a portion of your payments, so you continue to receive monthly payments and also get a lump sum. Lastly, you can sell the entire structured settlement annuity and receive a larger lump sum.

Each sale comes with fixed costs so you can lose more money if you sell portions of your annuity multiple times. Create a financial plan so you know how much you need and when. This helps avoid too many fees.

The choice largely depends on your financial needs and goals. A trusted structured settlement company can discuss your needs and offer the right fit for your financial goals.

Pros and Cons of Selling Settlements Payments

Benefits:

Get a lump sum of cash instead of small amounts over the course of months or years
Use the cash for your own financial goals, like buying a house, paying off debt, or making a major purchase

Drawbacks:

Companies charge a discount rate, which lowers the value of your take-home cash
The sale process takes time, often between one and three months

What is the Discount Rate?

One of the first questions people have is how much cash they will receive when they sell their settlement. This is a natural concern and is an important point to consider.

To understand how much money you’ll get, you need to understand the discount rate.

The discount rate is essentially a fee charged by the factoring company that reduces the value of the structured settlement annuity you’re selling. The average discount rate is between 9% and 18%, but it can be higher.

Contact multiple companies so you can compare quotes and get the lowest discount rate.

Once you calculate the value of your remaining payments and subtract the discount rate, you’ll know the present value of your structured settlement sale — in other words, the amount of money you’ll actually receive.

There are several factors that can impact how high the discount rate is, including:

Number of remaining payments
Value of payments
Date of payments
Market rates
Economic factors

How to Pick the Right Buyer for Your Structured Settlement

Choosing the best buyer is a key step in selling your structured settlement. The right buyer will offer the lowest discount rate, which puts the most money in your pocket. Consider the following criteria when choosing a factoring company:

The company should be honest, put your best interests first, and offer you different sale options to evaluate
The company should provide you a free, no obligation quote promptly
The company should offer you a competitive discount rate
The company should be willing and able to answer questions throughout the process and assist with paperwork
The company should never harass you or rush you during the process

How Taxes Work When Selling a Structured Settlement

You do not owe income tax when selling a structured settlement annuity resulting from a personal injury. If you don’t pay taxes on your monthly payments, you likely won’t pay them on the sale either.

Get The Cash You Deserve For Your Structured Settlement

Get a Free Quote
Call (800) 307-3213

FAQ

Here are some common questions and answers regarding transferring the rights of lawsuit settlements.

Can you sell any type of structured settlement?

Not all structured settlements are assignable, which means they cannot be transferred to another person or entity. If you currently receive monthly payments from an insurance company, they are typically assignable and you’ll be able to cash out your structured settlement payments. Workers’ compensation and social security payments, however, cannot be sold.

Can I legally sell my structured settlement?

You have the legal right to sell structured settlement payments as long as you can demonstrate financial need to the judge. Among other things, the judge would look at your financial obligations, living expenses, and how the sale is going to affect your financial situation, both in the near-term and long-term.

Where do I sell my payments?

A structured settlement company like DRB Capital can help. Call them now to get a free quote: (800) 307-3213.

Should I sell my structured settlement?

You should carefully consider your financial plans. Remember, you need a valid reason for selling your structured settlement payments. This can be current financial issues or an investment opportunity. Because this is a legal transaction, you’ll stand in front of a judge to present this financial need before your structured settlement sale is approved.

Why is a judge involved?

Laws to protect structured settlement holders ensure they do not make rash decisions which have long term negative effects on their finances. One part of these laws is that a judge must approve a structured settlement sale. The judge will make sure you have a good reason for selling and your buyer is offering a fair purchase. This only applies to the sale of structured settlement annuities, selling commercial annuities do not require court approval.

Are structured settlements taxable?

No, when structured settlements result from a personal injury, they are not taxable.

How long before I get my money?

The entire sales process typically takes between 1-2 months, but can take more as court approval is required. The factoring company should be able to give you a clear timeline. Also check how long it takes for funds to reach your bank account once the sale is finalized.

What happens if the judge does not approve?

If the judge does not approve your structured settlement sale, this does not mean you cannot sell your settlement payments in the future. You should review the reason for the refusal and address it before you try to sell again.

Do I have to pay interest when I sell my structured settlement payments?

There’s no interest charged on your sale, but the discount rate reduces the amount of cash you actually receive. This typically ranges between 9% and 18%.

Can I sell a minor’s settlement?

Yes, it is possible to sell a structured settlement on behalf of a minor. However, you must demonstrate that the funds will be used to benefit the child, such as paying for medical expenses.