- Written By Lindsey Crossmier
StructuredSettlements.com Writer & Researcher
Lindsey Crossmier is a writer at StructuredSettlements.com with a specialization in financial education. Armed with a professional background in creative writing and an understanding of risk management and behavioral finance, Lindsey helps enable our readers to find long-term financial security.Read More
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Savannah Pittle is a highly accomplished writer and editor with a versatile background across diverse industries and a commitment to empowering our readers. She contributes her expertise to StructuredSettlements.com, educating readers about complex subjects like structured settlements to foster financial literacy.Read More
- Updated: June 19, 2023
- This page features 7 Cited Research Articles
Options for Cashing Out Your Structured Settlement
When you receive a structured settlement from a court case, those regular payments can provide stability and a reliable income. However, there is a downside to these payments—they lack liquidity. This means you can’t easily access the money that makes up those payments.
This can become problematic if you encounter a large expense that your scheduled structured settlement payments can’t cover. It could be something like urgent home repairs, medical costs not covered by insurance, or the need to buy a new vehicle.
Luckily, there is a solution if you require more cash than your immediate structured settlement payments provide. You have options to sell all or part of your future payments in exchange for a lump sum of money.
A partial cash-out lets you sell a portion of your future payments. There are different ways to go about it. For example, you could sell all your payments for a specific period, like six months. Alternatively, you can sell a fraction of each payment over a certain time, such as 25% of each payment for the next two years. This way provides a balance; you can still receive some regular income along with the lump sum.
Lastly, you can sell specific future payments. This allows you to maintain the remaining structured settlement schedule while receiving a lump sum for the payments you choose to sell.
In addition to exploring these alternatives, there is also an option called a cash advance.
The process of selling your structured settlement payments typically takes 45 to 60 days, which might be too long when you’re facing a serious financial crisis. This is where a cash advance can be helpful.
A cash advance is a viable option if you need immediate funds. This involves receiving a lump sum payment upfront while agreeing to forfeit a portion of your future payments in return. With a cash advance, you can receive up to $1,000 quickly, typically within a few days, providing you with the immediate funds you need.
It’s a quick way to access cash, but it’s important to remember that you’ll be receiving less money in the long run.
To ensure you’re getting the best possible deal, take the time to explore your options and compare offers from different companies. It’s also wise to check the purchasing company’s track record with the Better Business Bureau to ensure reliability and trustworthiness.
Pros and Cons of Cashing Out a Structured Settlement
Selling your structured settlement payments involves a complex process. You will need to appear before a judge who will decide whether selling your structured settlement payments is in your best interest.
Additionally, keep in mind that the amount of money you receive will be less than the total dollar amount of your payments. This is because the company purchasing the payments needs to cover its legal and administrative costs while making a profit.
Before making the decision to sell all or some of your future structured settlement payments, it is crucial to carefully consider the pros and cons involved. This step ensures that you fully understand the potential benefits and drawbacks of cashing out your structured settlement.
- Immediate access to a larger amount of cash
- Helps you overcome a financial crisis
- Enables you to pay for large expenses like home repairs or medical bills
- You will receive less money overall throughout the life of the settlement
- Loss of a guaranteed income stream
- Forfeiture of future payments
Taking the time to evaluate these factors allows you to assess the impact on your financial stability, future income and any potential long-term consequences. Consult with a tax professional to understand your implications.
Is Cashing Out Your Structured Settlement Right for You?
Deciding to cash out your structured settlement is a personal decision that should be based on a thorough evaluation of your financial situation. Consider your current financial needs, obligations and long-term goals. Do you have pressing debts that need to be paid off? Are you facing a financial emergency? Or do you see a lucrative investment opportunity that requires a significant amount of capital?
On the other hand, consider the long-term benefits of your structured settlement. It was designed to provide steady income and financial stability. Weigh your need for immediate funds against these long-term benefits.
Most of the sales involve only a portion of a person's structured settlement payments. Only a small number of individuals choose to sell all of their future payments, and many of them don't rely solely on their structured settlements for their monthly income.
Before deciding to sell your structured settlement payments, it’s important to explore all available options and consider if you can manage without the regular payments you’re thinking of selling.
Other options for managing expenses include:
A Loan: Check with your bank or credit union to see if you qualify for an unsecured loan. They may consider the payments from your structured settlement as income to assess your ability to repay the loan. However, it’s important to note that you cannot use your structured settlement as collateral for the loan.
Contacting Creditors: If you need more time to pay your bills, it’s worth reaching out to your creditors. They might be willing to work with you by providing extended payment terms, allowing you sufficient time to repay what you owe.
Hospital Charity Care: If you have medical bills from a hospital, check if they have a charity care program in place. These programs are designed to offer assistance with medical expenses and may be able to help you in your time of need.
Consumer Counseling: Nonprofit consumer credit counseling services are available to help you develop a debt repayment plan. They can provide guidance and support to create a strategy for effectively managing your debts.
Remember to carefully consider these options and determine which one suits your specific financial situation and needs best.
Important Questions To Ask Before Cashing Out Your Structured Settlement
If you’re considering cashing out your structured settlement payments, it’s essential to ask the right questions when dealing with potential purchasing companies.
Key factors to clarify include:
What will it cost me?
Make sure to request a written list of all costs associated with the transaction from the companies you consult. Inquire about the interest rate, fees, commissions, legal expenses, and notary fees. Compare the amount they propose to pay you with the value of your structured settlement payments.
Can I cancel the sale?
Obtain a written copy of the companies’ cancellation policies before agreeing to anything. It’s crucial to understand your options if you change your mind.
Are there complaints about the companies?
Check with your local consumer protection agency, state’s Attorney General office and the Better Business Bureau to gather information about any potential issues or complaints involving the purchasing companies.
What about taxes?
In most cases, the lump sum you receive for your structured settlement payments won’t be subject to taxation. However, it’s wise to confirm this with the purchasing companies to ensure you have accurate information.
Also consider whether you can manage without the regular income from your structured settlement and whether your need for a lump sum is genuinely more significant. This decision should not be made hastily.
Seeking a second opinion or an independent evaluation from a trusted source, such as your attorney or a financial advisor, is always a good idea. The lawyer who represented you during the court case resulting in your structured settlement may also be able to provide helpful guidance and support during this decision-making process.
How Do I Cash Out My Structured Settlement?
If other options haven’t proven effective for your situation and you’ve gathered enough information to support the sale of your payment, working with a company that specializes in buying structured settlement payments becomes a viable choice.
Once you decide to sell, the buying company will assist you with filing the necessary paperwork, guide you through the court process and provide the information you need to feel confident about your decision.
Here’s a step-by-step overview:
- Decide: Weigh your options and determine if selling is the right choice for you.
- Contact: Get in touch with us and we’ll connect you with a representative who will assist you throughout the selling process.
- Get your quote: In just minutes, your representative will provide you with a quote and address any inquiries you have.
- Complete paperwork: Your representative will send you the required paperwork, which you should fill out and return promptly.
- Appear in court: Your representative will help you schedule a court date where you will present your reasons for selling to a judge. The judge has the final say on whether the sale is approved.
- Cash out: Once the judge approves the sale, the money will be transferred directly into your account.
Read More: How to Sell a Structured Settlement
Role of Structured Settlement Purchasing Companies in the Cash Out Process
These specialized companies take into account market conditions and the future value of money to calculate the amount they can offer you for your payments.
They will guide you through the necessary paperwork and handle most of the legal requirements, including obtaining approval from a judge in your county. During this process, you will likely need to appear before the judge to explain how you plan to use the money. This court process is in place to protect structured settlement owners and is required by law in nearly every state.
The entire process of selling can take up to two months to complete.
By understanding these aspects, you can make an informed decision about cashing out your structured settlement and explore the best course of action for your specific financial circumstances.
7 Cited Research Articles
- National Association of Settlement Purchasers. (2022). Benefits of the Secondary Market. Retrieved from https://www.nasp-usa.com/benefits_of_the_secondary_mark.php
- National Association of Settlement Purchasers. (2022). How To Protect Yourself in the Secondary Market. Retrieved from https://www.nasp-usa.com/protect_yourself.php
- National Association of Settlement Purchasers. (2022). Secondary Market FAQ. Retrieved from https://www.nasp-usa.com/secondary_market_faq.php
- Consumer Financial Protection Bureau. (2017, June 7). What should I know before giving up my monthly disability, personal injury or structured settlement payments in exchange for a one-time lump sum payment? Retrieved from https://www.nssta.com/sites/default/files/library/2017/2017-06/CFPB%20Statement_0.pdf
- U.S. Securities and Exchange Commission. (2013). Pension or Settlement Income Streams. What You Need To Know Before Buying or Selling Them. Retrieved from https://www.sec.gov/investor/alerts/ib_income_streams.pdf
- Federal Trade Commission. (n.d.). What to Know Before Selling Your Disability Payments. Retrieved from https://www.consumer.ftc.gov/articles/0517-what-know-selling-your-disability-payments
- Nicks, C. (n.d.). Getting Cash Now From Your Long-Term Structured Settlement Annuity. Retrieved from https://www.nolo.com/legal-encyclopedia/getting-cash-now-from-your-long-term-structured-settlement-annuity.html