Structured Settlements & Bankruptcy
A structured settlement is an agreement between a plaintiff and a defendant. The agreement outlines what the plaintiff will pay the defendant over a certain length of time, as opposed to settling all at once. Bankruptcy, in contrast, is when an individual is unable to pay the bank any owed money. There are certain times when these two seemingly opposite concepts overlap.
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Security of Payment
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One major advantage that a structured settlement has is, depending on the terms of the individual agreement, it often survives bankruptcy. Thus, it is sometimes safer for the defendant to choose a structured settlement instead of a lump payment because if the court decides to bankrupt the plaintiff, the defendant can still receive payment.
Bankrupt Individuals
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Bankrupt individuals also have to sometimes engage in a structured settlement with their debtors. Because a bankrupt individual is effectively out of money, he will often go to court to set up a payment plan that allows him to pay back h deisbtors over time instead of risking potential short-term damages.
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Lottery
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Another common occurrence of structured settlements is in the case of the lottery. Individuals can choose to set up a structured settlement instead of a lump sum with their lottery winnings. A structured settlement can help a lottery winner parcel out his money.
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