Advantages of Settlement

Settlement is a quick and efficient means of reducing your debt load by effectively eliminating a portion of your remaining principal. If you are making the minimum payments on a credit card, settlement also saves you the significant interest charges racked up every month and achieves finality without destroying your ability to secure new credit. Delinquencies on your accounts will damage your credit score, but they also increase your leverage to negotiate the best deal. The further behind you are in your payments, the greater the risk assumed by the creditor.

You can request your credit file be updated to reflect that the debt was settled in full once a settlement is achieved. This demonstrates you’re making the effort to resolve your financial difficulties. A well-structured settlement also avoids the need for a debt consolidation loan that may require collateral assets. It’s unwise to risk other assets for a new loan if you’re eliminating unsecured debt.

Unlike a bankruptcy that stays on your file for 10 years, a settlement is viewed as a temporary condition designed to get you back on track with your finances. A bankruptcy makes it extremely difficult to get any new credit and the stress and social stigma can be lasting.

One particularly detrimental disadvantage to settlement is the possibility of the canceled portion of your debt being reportable income for tax purposes. It’s not worth negotiating a settlement unless the amount forgiven is more than enough to cover the additional tax. Consult your tax advisor regarding tax implications, and to determine if you qualify for the IRS insolvency rules.

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Selling Your Structured Settlement

Many people who have obtained structured settlements through their personal injury or workers' compensation claims wonder if they should try to sell their settlement in return for a lump sum payment. This may be a relatively modest curiosity, piqued by an advertisement announcing "It's your money!" and promising cash payment. Or it may be based upon an immediate need for funds. However, selling a structured settlement is not always possible, and it is not necessarily an economically wise decision.

Your Structured Settlement Should Work For You

The best time to decide that a structured settlement is not right for you is before you consent to such a settlement. You may wish to press for a lump sum settlement, for periodic lump sum payments in addition to smaller annual payments, or for a lump sum to be issued at a future date when you anticipate a particular need. If you work out a settlement package that is in your best interest at the outset, you will be able to maximize the value of your settlement and get the greatest tax benefit from the structured portion of any settlement.
Remember that the companies which purchase structured settlements intend to profit from the purchase of your settlement. Their profit comes out of the payments you would otherwise receive.
Recall also that if your future earning capacity is impaired as a result of your injury, you should consider your future needs when you are making any decision regarding the sale of your settlement.

Restrictions on Selling Settlements

There are laws in approximately two thirds of the states which restrict the sale of structured settlements, and additional federal regulations apply to the sale of structured settlements. You should expect to have to obtain court approval for the sale, and most states have statutes in effect which regulate the transfer process. The insurance company that issued the annuities for the structured settlement may refuse to cooperate with the sale of a settlement, citing policy language and asserting that payments cannot be assigned.

Tax Consequences

As a typical structured settlement is designed to provide significant tax advantages to the injured plaintiff, there can be significant tax consequences associated with selling part or all of a settlement. It may be that, while payments made under the settlement were not taxed, the lump sum received through the sale of the settlement will be taxed.

Shop Around For Offers

If you are approached about selling your settlement, or are looking for a buyer, don't take the first offer you receive. You will almost always benefit from consulting with different brokers or buyers in relation to your settlement. You should also take care that you are working with an established, reputable buyer.

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Structured Settlements

Is a structured settlement right for you? You might find yourself re-considering this option. Remember, the structured settlement will be paid over a course of time in several installment payments equalling the whole. This can be good or bad, depending on your personal needs.

It's looked upon as a secure and safe way to budget your funds properly, eliminating the chance of accidental overspending. It's also important to note that structured settlements are tax-free. All payments made via a structured settlement are nontaxable by federal tax guidelines (IRS Section 104(a)(2). 100% of every payment is tax exempt.

However, it's possible to sell structured settlements, and people do this all the time. There are firms that buy structured settlements and you have the option to sell to them. This provides you with a large one lump sum payment rather than the installment payments you would be locked into with your structured settlement.

There are some very trustworthy firms that will buy your structured settlement, J.G. Wentworth The Leading Purchaser of Structured Settlement and Annuity Payments are among the top of the list. They are one of the leaders in the business with 15+ years experience purchasing more than $2 billion of future payments, including structured settlements and annuities, from over 50,000 customers.

Another firm to consider would is Patriot Settlement. They go the extra mile in helping people obtain a large lump sum of cash now for their future payments from a Structured Settlement, Annuity or Lottery award.

Novation is a direct buyer of structured settlements. They provide cash now, in a lump sum, for people who are receiving payments over time, but need their money now.

You can get your free consultation at American Financial, it might be the best place to start if you're undecided.

Choosing the right specialty finance company to work with is an important decision, and many people do not know where to turn for advice. The Structured Settlement Alliance is designed to help you get the most money for your structured settlements and annuity payments. The SSA helps to make this process easy for you by matching you with the best possible financial institution to handle your settlement, and letting you decide how to proceed -- putting the control where it should be, in your hands.

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