Selling a Structured Settlement

Q. Why do people sell their Structured Settlement payments?
A. Generally, the people who choose to sell some (or all) of their settlement payment rights do so because their life circumstances have changed since their payment schedule was first established.

Consider the example of a twelve year old child awarded $333/month for 25 years in compensation for a dog bite. Twelve years later, that same individual (by then twenty-four years old and fully recovered) might prefer to receive a lump sum that could be used for education or for a down-payment on a home.

Or, consider the example of the 70 year old man disabled in a serious car accident. Assume his resulting personal injury claim is settled for $30,000 a year for the remainder of his (the accident victim's life), with a 20 year guaranteed minimum payout. Then, assume that after four years, the accident victim passes away ‚ leaving four heirs to split an annual payout that serves no ongoing purpose other than to remind them of their loss. Under the circumstances, the heirs will want to consider a sale of the remaining payments.

Similarly, take the example of the 35 year old woman with a settlement that includes a promised $100,000 payment that is not due for another ten years. If she elects to take time away from work to start a family, she would likely choose to sell the rights to that payment rather than waiting until she is 45 years old.

Simply stated, there are as many different reasons for selling rights to payments as there are people with life circumstances that change with the passage of time.

Q. How long does the process take?
A. The process can take anywhere from four weeks to four months, depending on the jurisdiction. Initial underwriting and contract processing can be completed quickly. The key factor is the courts' calendar. In some jurisdictions, these transactions can be processed very quickly. In other jurisdictions, it can take longer. Novation will work with the seller to make the process as efficient and uncomplicated as possible.

Q. Does Novation only deal with “million dollar” settlements?
A. No. Novation will fund transactions as small as $10,000 and as large as $1.5 million, but our “average” transaction is about $35,000.

Q. Can I sell some (rather than all) of my remaining payments?
A. Typically, Novation purchases only a portion of the remaining payments so as help a seller meet a defined near-term financial need. Whether the seller is seeking to raise ten thousand dollars or one million, Novation can structure a transaction tailored to the individual seller's needs.

Q. Why do I need a judge's permission to sell remaining payments?
A. A recently enacted federal law imposes a heavy tax on anyone who buys a settlement payout without a court’s advance approval. Around the country, state laws now require court approval as well. Generally, before anyone can sell (or transfer) the settlement payment rights, a court must find that the transaction is in the consumer’s “best interests.”

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