Selling Your Structured Settlement: What You Need to Know
Sometimes life's circumstances change and you may need a lump sum of cash sooner than your scheduled payments allow. Selling your structured settlement is possible, but it comes with significant trade-offs.
How Selling Works
You can sell some or all of your future payments to a factoring company (a company that buys future payment streams at a discount) in exchange for a lump sum today. This transaction requires court approval in most U.S. states under the Structured Settlement Protection Act.
The True Cost: Discount Rates
Factoring companies apply a discount rate (typically 9%–18%) to calculate the present value of your future payments. This means you'll receive significantly less than the total face value of your settlement.
Example:
- Future payments total: $200,000
- Discount rate: 12%
- Lump sum received: ~$140,000–$160,000
- Amount "lost": $40,000–$60,000
Pros of Selling
- Immediate access to cash for urgent needs (medical, debt, home purchase)
- Flexibility to invest or use funds as you see fit
- Can sell partial payments instead of the entire settlement
Cons of Selling
- Significant financial loss due to discount rates
- Loss of tax-free status — proceeds from the sale may be taxable
- Court approval required — adds time and legal complexity
- No reversal — once sold, you cannot reclaim those payments
Alternatives to Consider
Before selling, explore:
State-by-State Protections
All 50 states have enacted structured settlement protection acts requiring court approval before any sale. Courts must determine the transaction is in your best interest.
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