Your attempt to sell payments to companies that buy structured settlement payments may be met by opposition from the annuity issuer and the structured settlement obligor who send out the periodic payments to you.
These structured settlement companies operate in what is known as the Primary structured settlement market.
On the other hand, the companies that purchase future payments from recipients such as yourself are active in what is referred to as the Secondary structured settlement market, or the Factoring industry.
The Primary companies may object to selling your payments to a buyout company because it creates a new obligation for them to these payment purchasing companies.
Once transferred, the Primary company will be obligated to send out payments to the factoring company instead of to you as the payee of the personal injury damage.
Primary companies may be concerned that the transfer of obligation to the new recipients - i.e. to the companies that buy structured settlement payments - will create new liabilities and additional fees and administrative and operating costs to them.
Although Primary companies may resist to the transfer, you don't have much to worry about it in most cases if selling some of your payments is clearly in your best interest.
Once you get a court approval, the companies that buy structured settlement payments will assume your payments rights and the Primary structured settlement company will be ordered to send payments to the newly assigned recipients.
While primary companies don't like the idea of transferring payment rights, some structured settlement companies have moved to buy out settlement payment rights themselves from the payees, in what is sometimes referred to as Commutation of structured settlement payments.
Read more about factoring vs commuting structured settlements here.
A Primary company that decides to cash out its own payments may have a competitive advantage over competing secondary market companies that buy structured settlement payments, for the following reasons.
When a primary structured settlement company pays out a lump sum to the payee in lieu of continuing to issue structured settlement payments, both the seller and the company may benefit from the transaction:
Primary market companies have exercised various techniques in competing with secondary marketing companies to cash out payments or attempt to stop the buyout altogether.
One company was attempting to interfere with factoring company contract by writing to the judge or petitioning the court very close to the hearing offering a better quote to undue and cash out the payments.
Reportedly, judges would turn down the offer and there was little chance payees would respond to the competing quotes at that late stage of the transfer contract.
Other primary companies have been competing in the marketplace with the factoring companies offering to buy back the payments at a better price than outside companies and leaving it up to the payee to decide which offer to accept and what bidding company to respond to.
These payments/cash conversion practices are relatively new to the market. Payees receiving structured payments may submit a request to the insurance company to convert future payments to cash in some qualifying cases of financial hardship, such as medical expenses, job loss, terminal illness and other situations.
The criteria to qualify for such a cash conversion is much narrower than the Structured Settlement Protection Act provision for payments transfer to be in the "best interest" of the payee and its dependents, that may be broadly interpreted.
As in transfer contracts with companies that buy structured settlements in the factoring market, Hardship Conversions also need court approval.
Recently one leading structured settlement issuing company has been active in sending out notifications to recipients of their annuity payments educating them on the benefits of maintaining the periodic structured payments and the disadvantages of selling their payments for much lower value to companies that buy structured settlements in the factoring industry.
The company is warning payees of the loss of economic value and the loss of long-term financial security as well as their vulnarability to aggressive tactics by factoring companies attempting to buy out payments and repeated payments after successful factoring transaction.
They are offering lower rates to payees willing to convert payments to cash now, competing with the factoring companies that buy structured settlement payments, and they are vowing to intervene and alert the courts when notified of bad contract agreements involving sharp discount rates that are not in the best interest of payees willingly entering in the deal.
In doing so, the primary companies attempt to rival the secondary factoring market and bring down discounting rates purportedly to protect the interests and welfare of their consumers.
Despite interfering attempts of structured settlement companies - for your benefit or not - be mindful of your rights to sell your structured settlement payments and don't be deterred from pursuing court authorization if you believe it is the right thing to do and in your best interest at this time in your life.
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