How to Factor a Structured Settlement

If you are a plaintiff in a civil suit and the other party decides to settle out of court, the defendant or insurance company might offer a structured settlement. In many cases, courts allow defendants to disperse payments over five or more years. While structured settlements do provide periodic income at scheduled intervals, they may not be practical if you need a large amount of cash right away. If you need a lump sum to make a major purchase or for another reason, consider selling, or factoring, your settlement to a private investor or factoring group.

Things You'll Need

• Court documents
• Settlement agreement
• Settle balance and payment schedule information

Instructions

1. Schedule an appointment with an experienced attorney that specializes in annuity and contract law. Some states have strict rules on the conveyance or sale or structured settlements for lump sum payments. Allow the attorney to review your structured settlement to determine if you can assign or sell it to an investor or factoring company.

2. Enlist the services of a factor broker or search for private investors or factoring companies. There are many online sources for finding investors or factor companies willing to purchase structured settlements. Ask for references from attorneys, bankers and Realtors in your area that have relationships with factor companies or investors that offer lump sum payments for various types of annuities, contracts or private real estate mortgages. Most investors that purchase annuities or structured settlements also purchase other types of long-term debt.

3. Prepare multiple copies of all court documents, settlement agreements and balance information related to the structured settlement. When requesting quotations from potential investors or factoring companies for the purchase of the structured settlement, you should provide needed paperwork so the company can evaluate your settlement and tender an offer.

4. Request multiple quotes from several investors or factoring companies. Keep in mind that the investor or factoring company will offer you an amount less than the face value of the settlement owed to you. Depending on the creditworthiness and stability of the party making the settlement payments, expect to receive offers ranging from 50 to 90 percent of the face value of the settlement balance.

5. Review all of the offers you receive for cashing out the structured settlement. Choose the offer that offers you best terms and cash-out amount. Contact the investor or factoring company and notify them of your intention to accept their offer.

6. Receive the documentation needed to facilitate the transfer of the settlement to the investor or factoring company. Take the documentation to an attorney and have them review it and explain any terms or language you do not understand. Once you understand and agree to all the terms of the agreement, sign the documents in the presence of a notary public and send them to the investor or factoring company.

7. Arrange a meeting with the investor of factoring company representative. If applicable in your state, execute any additional documents needed to assist the other party in receiving permission for you to assign interest in the structured settlement or factoring company.

8. Receive the check for the negotiated amount from the investor or factoring company. If the transfer requires court approval, you should receive your check as soon as a judge signs off on the assignment to the investor or factoring company.

References

• Internal Revenue Service: Structured Settlement Factoring Audit Technique Guide (ATG)
• Expert Law; "Selling Your Structured Settlement"; Aaron Larson; April 2005
• Settlement Quotes: Get Cash For Your Structured Settlement Payments
• Integrity Funding Sources: FAQ
• Olive Branch Funding: Structured Settlements