Selling a Structured Settlement – "I Want My Money!"

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Selling a Structured Settlement – "I Want My Money!"

Post by rogerwimmer » Mon Oct 18, 2010 9:03 am

Doc: I see TV ads by companies that offer to buy structured settlements from people. Although I think I understand what's going on, would you explain what those companies actually do? Thanks in advance. - Anonymous

Anon: Structured settlements are not easy to summarize in just a few words, but I'll try.

A structured settlement is basically a pay-off of money over time. This usually relates to money received in a court case, an insurance claim, or even a lottery. Instead of a person receiving a lump sum, the amount is paid off in installments, usually several years. So, for example, a person may be entitled to $100,000 from a court case or insurance claim, but instead of getting all the money in one payment, the person receives $10,000 a year for 10 years.

Structured settlements are a big deal. In fact, several states have passed laws stating that no one can receive a lump sum from any source—the money must be paid off in a structured settlement. The reasoning behind this is so that people who are entitled to a large sum of money do not "blow" it immediately after receiving the funds.

Now . . . you asked about selling a structured settlement. Whenever the topic is money, especially large sums of money, always remember that there will be someone who tries to figure out a way to get that money. Enter the scheme of buying/selling structured settlements. The procedure is very simple—a person who has a structured settlement, but doesn't want to wait years for the money, sells the "note" to a company such as J.G. Wentworth.

But, and this is a HUGE "but," the company doesn't buy the "settlement note" for its full amount. It pays only part of the total. For example, a person who has a $100,000 10-year structured settlement and decides to sell it after the first year would not receive $90,000 (the amount remaining in the settlement after one year) from the company buying the "note," but maybe only $50,000 (or some other amount substantially less than the remaining $90,000). That's how the company makes its money. It buys a settlement "note" for less than it's worth and then receives the money over the remaining years of the settlement (the company is willing to wait for the money).

Do you sense a problem here? If you do, then you're not alone. In fact, many states, insurance companies and other companies/groups that pay out large sums of money will not allow the settlement "note" to be signed over (conveyed) to a third party. That alone should give an indication of the feelings about selling structured settlements to another person or company.

OK, so that's some preliminary information and I think it would be helpful for you (and anyone else) to read more about structured settlements and the sale of these "notes."

First . . . read this summary and then read this legal website discussion. I also suggest that you read some of the discussions in this search.

I hope that answers your question and indicates that anyone who is thinking about selling a structured settlement should consider many things before making a phone call to a company that buys them.

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Roger Wimmer is owner of Wimmer Research and senior author of Mass Media Research: An Introduction, 10th Edition.

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