Structure Settlement
Common Misconceptions
Structure Settlement – this is a common misspelling of the actual term “structured settlement”. A structured settlement is a type of financial agreement given to someone in settlement of a lawsuit. The injured party sues the defendant who agrees to settle the case by offering a structured payment schedule where the payments are paid over a period of time -- often ten, twenty, thirty years or more.
Structured settlements are flexible – in fact, structured settlements are not flexible. Once the terms of the settlement agreed upon, the amount and timing of the payments are all fixed. If a settlement recipient needs immediate access to a larger amount of money from their settlement, perhaps to pay off debts or to pay for educational expenses, they cannot simply demand a larger cash payment. While the initial settlement is not flexible, there are companies called “structured settlement purchasing” companies like Stone Street Capital that will convert future payments into lump sum cash. This way a recipient that has an immediate need for money can tap into their settlement get the cash that they need, and still receive the remaining partition of their future payments.
Structured settlement loans – purchasing companies will purchase the future payments of a settlement recipient, but they will not provide a loan in the classical sense. If someone agrees to sell a portion or all of their payments, they may be able to receive a lump sum payment, but it is not possible to use the future payments as collateral for a loan.
Value of future payments – settlement recipients that are interested in receiving a lump sum cash payout will learn about the future value of money. There are calculations that go into how much future payments are worth depending on factors like the amount of the payments and how far in the future they are to be paid. If a settlement recipient has future payments of $100,000, their cash equivalent is not $100,000.
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