Structured Settlements: Cash Them Out?

By: David Nemer
Submitted: 2007-01-17 16:17:14
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Structured settlement payments are a type of payment a party receives upon receiving a favorable decision during legal proceedings. As part of the courts ruling, one party is ordered to make financial compensation to the other party. Often times, the amount of the compensation awarded is spread out over time. Structured settlements are payments arranged in this fashion.

Many people choose to receive a structured settlement payment over time instead of a lump sum payment if they know then will need cash payments for expenses in the future. Also, the court will sometimes award structured settlements on behalf of the party required to make the payments. Setting up payments like this has the benefit of guaranteeing payments over a long period of time to the person receiving them, and lessening the financial hardship of the party required to make the payments.

People receiving structured settlements have the option of selling their entitlements to third party companies. When they do this, a company will purchase their settlement contract for less than the total value, and usually offer a lump sum payment. If, for instance, a person were receiving $100 per month for the next 60 months, or $6,000 total, a company could offer to pay the individual a lump sum payment of $5,000. The individual will receive less total money overall than if they chose to continue to collect their payments over time, but they will have $5,000 immediately instead of having to wait for the next 50 months to have that same amount of money.

Structured settlement companies make their profit by purchasing the structured settlement for less than the amount that they will collect. People choose to sell their settlements for a variety of reasons, including:

• Making down payments on large purchases
• Purchasing a car
• Paying for education.
• Buying a house

There are a ton of reasons one would elect to sell their payments in order to receive a large, immediate lump sum payment. Structured settlement transactions must meet strict guidelines and legal restrictions in order to be completed successfully, and for this reason it is best to secure the services of a reputable structured settlement company before making any decisions.

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