What Is a Structured Settlement and a Structured Settlement Factoring Transaction?

structured settlement is an agreement between a personal injury plaintiff (claimant) and a defendant liability insurance company in which the claimant agrees to settle a lawsuit in exchange for payments to be made over time by the liability insurance company. The liability insurance carrier then buys an annuity policy from a highly rated insurance company to make those payments on behalf of that liability insurance company. The payments are “structured” in the sense that they are to be paid periodically over time to assist a claimant to plan for their financial future and to ensure that a claimant does not squander a one-­‐time lump sum payment. Structured settlements contain prohibitions against selling, assigning or otherwise alienating the payments to be made there under. Structured settlements are a popular method for settling personal injury lawsuits and wrongful death cases.

A structured settlement factoring transaction is the selling of future structured settlement payments. People who receive structured settlement payments may decide at some point that they need money immediately rather than wait until future payments are made. The reasons for this need vary but can include unforeseen medical expenses for themselves or a loved one, the need for improved housing, for education costs, or to start a new business. To meet this need, a claimant can, notwithstanding the anti-­‐ alienation provisions described above, sell all or part of its future payments for a present lump sum.In order to do this, a claimant must seek approval from a judge to sell these payments. This process is more fully discussed later in this article.

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