When someone wins their civil lawsuit or agrees to a settlement, the awarded amount is sometimes paid out over a certain period of time. Structured settlements can be paid out in payments that stretch over many years. When an individual decides they want to cash in their future payments to a structured payment broker, they must go through the courts to get approval.
Why Do People Sell Their Structured Settlements?
Although structured payments can certainly offer financial security for individuals who have been awarded settlements, some people end up preferring a lump sum payment after they have agreed to a structured arrangement. The following are some of the common reasons individuals end up pursuing the transfer of their structured settlement payments, so they can have the cash they need.
- To pay off debts
- To purchase a home
- To purchase a vehicle
- To start a business
While most structured arrangements can be transferred fairly easily, it is important individuals realize their transfer must be approved by the courts. The Periodic Payment Settlement Act of 1982 was put into law to protect structured settlement recipients from quickly depleting their settlement funds.
It is up to the judge to decide whether or not the structured payments can be transferred. With the court system in charge of the decision, this protects individuals from being taken advantage of by structured settlement brokers.
Reasons the Judge Might Deny a Structured Settlement Transfer
During the hearing for a structured settlement transfer, the paperwork is filed and the judge will ask certain questions of the individual asking for the transfer. As long as the reason for the transfer is valid, judges will often grant the right to transfer. There are some reasons a judge may deny a transfer request, including the following.
- There is no evidence of a financial need on the part of the individual.
- The individual cannot prove or adequately explain how the funds will be used.
- The discount rate of the transfer is unfair to the individual.
- The individual does not show they understand the transfer process or the implications.
- The individual does not show a proficiency for managing their finances.
It is important for individuals to realize judges do scrutinize structured settlement payment transfer requests, to protect the individual. If the judge denies a request, this brings the transfer process to a halt, but it does not necessarily mean the decision is final.
If the individual is able to prove their situation has changed or they have chosen another structured settlement broker, an additional hearing could be scheduled in the future and a judge could approve the previously denied request for transfer.
Before choosing to sell structured settlement payments, individuals should carefully research their options and ensure they meet the requirements the judge will be searching for during the hearing. With careful consideration and attention to detail, individuals are more likely to get the approval for transfer they are looking for.…