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August 01, 2007

Selling your Structured Settlement is "Like a Box Of Chocolates"

Are you receiving a structured settlement and being tempted to sell your structured settlement payment rights because you need "a little cash" now?

Beware! You could be seduced to sell a whole lot more than you actually need because of the profit requirements of the factoring company making the offer to buy your structured settlement payment rights!

Consider this situation. A gentleman who recently called me for advice, after reading this blog, was seeking about $11,000 to pay off some debts. A previous lump sum had already been sold some time ago. The only remaining payment was over $60,000 due in 2010. Apparently he was getting told that the structured settlement payment rights to ALL of the remaining payment had to be sold to "net" what was needed. Apparently, from what i heard "there was not enough profit in it" for the factoring company to do the deal for less.

I spent some "pro bono" time on the phone with this gentleman to provide some education on the subject and to help him realize that it might not be in his family's best interest to sell all the payment rights in relation to the amount of debt that needed to be paid off.

Furthermore, the factoring company was promising the man the money in 4-6 weeks. Without Court approval there is a 40% excise tax which would surely be passed onto the seller. 4-6 weeks is just not realistic "sales b.s.". As I said to the man, "if you later hear from them after 6 weeks that it will take a few weeks or longer, are you going to sue"?

The lessons to be learned here are:

  1. You should always seek independent financial advice before signing any contract to sell your structured settlement payment rights.
  2. There is an inherent conflict of interest in seeking such financial advice from a representative of the company offering to buy your structured settlement payment rights (and make a profit). Factoring company representatives appear to be like Forrest Gump's "a box of chocolates".
  3. A structured settlement annuity is not a bank account! Plan accordingly, if you can.

Posted at 10:17 AM in Factoring Company Bad Business Practices, Financial Literacy, Structured Settlement Factoring, Structured Settlement Payments, Structured Settlement Transfers |

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    Ways You Can Structure Your Settlement Payments in 2024. With a structured settlement you can have more than one type of payment in a single contract. Different types of structured settlement payments can be customized and combined to meet your needs on a stand-alone basis, or in conjunction with other financial products. Diversify your structured settlement, if you wish, by funding with more than one annuity issuer, with treasury funded structured settlements, index linked structured settlement payments and market based structured .
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  • What Are Structured Settlement Annuities?
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  • History of Structured Settlements
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  • Firmwide Qualified Settlement Funds Debunked
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  • New York Insurance Advertising law requires the full name of the Insurer to be listed along with the city and state of the principal office. Stating that you represent these fine companies using Insurance company logos without the preceding information are also illegal
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