Selling a structured settlement is a significant financial decision that can have lasting implications. As such, it’s crucial to approach the process with a clear understanding of what it entails. Unfortunately, there are numerous misconceptions surrounding the sale of structured settlements that can lead to confusion and poor decision-making. This article aims to bust those myths, providing clarity for individuals considering this route.
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Myth 1: Selling Your Structured Settlement is Illegal
Truth: Selling your structured settlement is perfectly legal, provided the transaction adheres to federal and state laws. In the United States, most states have enacted Structured Settlement Protection Acts (SSPAs) which outline the legal process for transferring the rights to future structured settlement payments. The process typically involves obtaining court approval to ensure that the sale is in the best interest of the individual selling their structured settlement.
Myth 2: You’ll Lose a Significant Portion of Your Money in the Process
Truth: While it’s true that you will not receive the full amount of your future payments when selling your structured settlement, this doesn’t necessarily mean you’re losing money. The amount you receive (commonly known as the “discounted” value) takes into account the time value of money, which is the concept that money available now is worth more than the same amount in the future due to its potential earning capacity.
However, the amount you receive can significantly depend on the terms of the deal, including the discount rate used. As such, it’s essential to work with a reputable purchasing company and possibly consult with a financial advisor to ensure you get a fair deal.
Myth 3: The Process of Selling a Structured Settlement is Quick
Truth: Selling a structured settlement often involves several steps, including obtaining a quote, reviewing the agreement, seeking independent professional advice, and getting court approval. These steps are in place to protect your interests and ensure the transaction is in your best interest. As such, the process may take anywhere from a few weeks to several months.
Myth 4: You Have to Sell Your Entire Structured Settlement
Truth: This is not necessarily the case. Depending on your needs and the agreement with the purchaser, you might opt to sell only a portion of your structured settlement. This way, you can get a lump sum of money upfront while still retaining a portion of your regular settlement payments.
Myth 5: Once You Decide to Sell, There’s No Going Back
Truth: Selling your structured settlement is a significant decision, and the law provides safeguards to ensure you’re making the right choice. Even after you sign a contract with a purchasing company, a judge will review the transaction to make sure it’s in your best interest. If the judge finds the deal unfair or if your circumstances change, the sale can be stopped.