Structured Settlement FAQs

Why do people receiving structured settlement payments sell their future payments?

Because they may need to:

Achieve personal or family financial objectives
Adapt to changing circumstances in their lives
Gain access to assets they already own

I thought structured settlement payments were used to protect people who are seriously injured, can’t work, and depend on those payments for their income. Won’t selling those payments leave them without any financial support?

Structured settlements are used in all kinds of lawsuits, not just those involving serious injuries. Most people who want to transfer part of their structured settlement don’t depend on those payments for all of their monthly income.

Even people who can’t work or depend in part on those payments often need to sell a part of their future payment rights when they have emergent needs. For example, a man who uses a wheelchair because of a train accident might receive a monthly payment of $6,000. The secondary market will give him the flexibility to transfer $750 per month for 60 months so he can buy a wheelchair-accessible van to make it easier to get around.

What laws govern the secondary market?

In 2001 NASP and other industry leaders wrote a Model State Structured Settlement Protection Act. As of today, most states have passed settlement transfer laws requiring disclosures and court approval of structured settlement transfers. In 2002, a federal law extended the tax-free nature of future payments to lump-sum payouts made in a sale in the secondary market. These state and federal laws provide a firm regulatory foundation to the secondary market.

Why can’t I just use my structured settlements as collateral for a bank loan?

Because even using your payments as collateral is considered a transfer that must be approved by a judge. Banks typically don’t want to go to the expense and inconvenience of getting court approval just to issue a loan. What’s more, a company that purchases or loans against structured settlement payments must agree to take on certain obligations from the insurance company. These include certain fees and agreeing to pay for the insurance companies’ litigation expenses if there is ever a lawsuit relating to the transaction (called an indemnity). Most banks are unwilling to take on these obligations.

Is it a bad idea to sell my future structured settlement payments?

Not if you know what you are doing, why you are doing it, and are assisted by experts who understand the process. Although MyLumpsum does not provide legal, financial or professional advice, we will help you along the way, so that you can obtain access to your money as quicky as possible in order to address your needs. You understand your financial, personal, and family circumstances and situation better than anyone else. You have the added security of knowing that a judge will review the transaction and protect you to make sure it is in your best interest.

Do I have to transfer all of my future payments?

No, it is very rare for payees to transfer all of their future payments. Most secondary market transactions involve the sale of only part of a payee’s future payment rights. Most payees transfer only as much as they need to take care of changes in their circumstances—a divorce or home foreclosure, for example—or to achieve a specific goal—like a down payment on a house or tuition payments.