The fact remains, selling all or part of your structured settlement will always be a very important financial decision. And it will always be strongly recommended that you obtain an attorney or certified financial planner to assist you in the process. (some states require that you do) But, let’s also face the fact that many people do not exercise this option partly due to the financial cost involved with obtaining such advice. So, quite often it is the client dealing directly with a factoring company. A reputable factoring company can assist you tremendously with personalized one-on-one service, and custom design a buy-out plan based on your current and future financial needs. On the other hand, a not-so-reputable factoring company may try to misguide you into making a decision that is not particularly in your best interest, but in fact in their best interest.

The onset of the new “Factoring Marketplace”:
Factoring marketplaces (such as QuoteMeAPrice.com) frequently conceal client contact information and allow most (if not all) preliminary correspondences and bids to occur via email. This is the ideal solution for the individual who is some-what financially savvy and internet savvy. It is also ideal for the individual that has a good understanding of what payments they want to sell. But, what about the individual who is not particularly financially savvy, and may have many questions about the process, payments, etc..?   As part of the QMAP factoring marketplace you can still call the factoring companies who are bidding on your settlement and get your questions answered before you proceed with any possible sale.    Bidders on the Quote Me A Price.com website are also able to make suggestions to you via email based on information you include on your quote form.   Many times our factoring bidders have suggested to clients to take alternatives routes (in regards to what payments to sell) because the client was asking to sell payments that didn’t really make financial sense (the payments were too many years out in the future, and the discount rate applied was not in the clients best interest).

   You have various options to choose from when selling payments, and you should fully understand these options in order to make a better decision on what payments to possibly sell.   Before we get to the options,  you must also know the following fundamental 3 facts! 

1. The further out in the future your payments are, the less money you will be offered. (payments out past ten years don’t have much value, and strong consideration should be given to selling those payments)

2. You can sell all of your payments, or only a portion of your payments (a portion of your monthly payments, or a portion of your lump sums)

3. Lastly, due to the cost involved for factoring companies to process a transaction, there is a minimum size transaction that Factoring companies generally will consider. You must be selling payments that will pay you a lump sum of at least $5,000 to $7,000. (this can vary slightly)

The following two clients are examples, client A and client B:

Client A is receiving $1,200 per month for 20 years
Client B is receiving $50,000 lump sums every January 1st for 10 years.

Both clients above have many options, we’ll explore some of them below:

Client A Options:

1. Client A could opt to sell only $300 per month, for 5 years.
2. Client A could sell $500 per month for 10 years, starting 3 years from now.(to keep the next 3 years worth of $1,200 payments) and still receive $700 dollars per month for the 10 years (remember this client sold $500 of the $1,200 dollar payment)
3. Client A could sell virtually any amount of monthly payments, for virtually any period of time. (remembering that the lump sum must be at least 10 or 12K)

Client B: (who receives $50,000 lump sums every January 1st for 10 years)

Client B Options:
1. Sell the entire 50K, for 1 year, or sell it for two years, 3 years, etc.. or for all 10 years.
2. Sell the entire 50K from years 5-10, years 7-10, etc..
3. Sell only a portion of the 50K (for an example, let’s say 20K) of the lump sum for 4 years, 5 years, 6,7, etc..
4. Sell only a portion of the 50K (let’s again say 20K) for the last 3 years, last 5, last 7 years, etc..

Many scenarios exist for each client. The question becomes how much money do you personally need, and what payments do you need to keep? (keeping in mind future income needs, your ability to generate future income, retirement, etc.)

Part of the process of attempting to sell your structured settlement is the issuance of a court order and having a judge approve the transaction. You are usually not expected to pay for this, the cost is normally included in the purchase price that has been quoted to you.  You will not pay for this on the Quote Me A Price.com website, bids include any court fee’s.  (you do however want to double check this with the company who is purchasing your settlement if you do not use the Quote Me A Price.com website)

Depending on the circumstances, you may be expected to attend the hearing in court. It’s the judges job to review the proposed transaction, and make sure it is in the best interest of the client and the clients dependants to sell. The judge will review all extenuating circumstances, and if they agree, they will approve the transaction.

However, if the judge looks at the proposed transaction and is made aware of circumstances that do not favor a sale, he or she will deny the proposed transaction. Transactions have been denied for many reasons, some reasons include:

Improper use of the money to be obtained from the sale (cosmetic surgery, vanity items, etc…)
A poor discount rate offered by a factoring company.
Lack of additional income for dependants

In cases where clients depend on a structured settlement for needed income, the judge ideally will try to make sure that this is your only option, and the “deal” makes financial sense. In certain cases where a structured settlement is supplemental income, the judge may tend to be a bit more lenient about the approval of the transaction.

Let’s first take a look at structured settlements. “A structured settlement is a structured cash payment through an annuity system that is established to compensate injury victims for their losses. The structured settlement is a way of protecting the victim from economic loss and hardship”. The court systems will often award a structured settlement when there is a long-term cost of living associated with an injury.

Understanding why you have been awarded a Structured Settlement, if you rely on your structured settlement for the majority of your income needs, then it is not a good idea to sell part of your structured settlement. A “Quick Fix”, is unquestionably not the best answer for your long-term needs. Take a look at it from this perspective, you will possibly be “Selling Your Income”. Depending on the amount of money you are looking for, alternative financing options could possibly exist that you may not be aware of, that might allow you to keep your structured settlement.

If the above mentioned scenario happens to be your personal circumstance, then you should absolutely contact a financial planner or attorney and ask for advice on selling your settlement. (it’s always strongly recommended to consult a financial planner, but if your settlement is your sole source of income, then you unquestionably should consult with a qualified financial planner or attorney)

We’ve outlined the best methods of selling a structured settlement, structured settlement owners should also be aware of what mistakes not to make when attempting to sell a structured settlement. The biggest mistake, and one most often made, is waiting until you are in a financial crunch and selling your settlement quickly, without getting multiple cash offers. This is a difficult scenario to overcome, because it’s generally when we have run out of money that we look at alternatives to obtaining money (selling off a settlement).

Here is the worst case scenario.

You’ve run out of money, bills have piled up, and you decide “OK, I’ll sell my settlement or part of my settlement for some quick cash”. You then make one phone call (and only one) to a “Factoring Company” that you’ve seen on TV. They quickly tell you, “You can have 30K”, 40K, (what-ever it may be) within 6-7 weeks. In a financial crunch, this seems fantastic, and your troubles are over in 6 or 7 weeks. (provided you can wait this long to get your cash). Some factoring companies will give “advances” to clients who can’t wait the 6 or 7 weeks. With the above scenario, the factoring company sells you on the fact that you’ll have 30K in 6 or 7 weeks, and being a bit desperate, you take the offer. Provided that you’ve come across a reputable factoring company (who hasn’t added some court fee’s so you actually get $27K), you get your cash in 6 weeks. This scenario goes on daily, and clients often don’t know that they have potentially missed out on thousands of dollars. QMAP has seen this exact scenario, where two siblings had received separate, but identical settlements. One sibling sold her settlement using the “Wrong” method, (as described above) The second sold her settlement using the correct method for $30,000 more. (identical Settlements, a $30,000 difference in buyout price)

What the above client could have done, is called a minimum of 3 factoring companies, and received multiple bids. And then gone back to the previous companies with the offers. Chances are if this was done, the client may have received offers that were several thousands of dollars more. This process does work, and has been used effectively for years. But, this process can also be frustrating, time consuming, and if your not able to find one of the factoring companies who can actually pay you the best price, you can still can possibly miss out on thousands of dollars. The best method of selling a structured settlement would be to list it for bid on a marketplace platform where multiple top rated funding companies compete with cash offers. You can do that with this link Cash Bids for Structured Settlements This competition between top rated settlement companies forces higher cash offers, and allows the lowest possible discount rates to be applied to the buyout price. Simply put, it would get the client the most amount of cash back possible, in the shortest time frame.