Pros and cons of using structured settlements as a quick cash source

Many people who own a structured settlement consider selling all of part of their structured settlement so they can get their hands on some quick cash. In general, if you have a structured settlement it is generally not a good idea to sell it for cash, if you wanted cash in the first place you should never have agreed to a structured settlement. What you should have done instead was ask for a lump sum. However, people who own structured settlements are just like everybody else and they can find themselves in some type of financial emergency, which requires them to get their hands on some cash as quick as they can.

One of the best things about owning a structured settlement is that it allows you to get your hands on some cash when you are faced with a financial emergency because you can sell a small portion of your structured settlement for the cash that you need. Just like other methods of obtaining quick cash selling your structured settlement, have its good and bad points.

Here is a look at the pros of selling your structured settlement.

Number one: Quick cash
You will be able to raise the amount of cash that you need to cover your financial obligations. Most people usually find that selling their structured settlement is an easy process, and it is nice because it allows you to cover any unexpected financial situation that comes up. You just need to be careful when selling your structured settlement so that you only sell it for a true emergency; you do not want to sell part of it off just so you can go out to a fancy restaurant to eat dinner.

Number two: Choices
If you are considering selling your structured settlement, you have a choice of selling either all of your structured settlement or a portion of your structured settlement. This choice gives you the perfect chance to get just the amount of money that you need to meet your unexpected financial expenses. However, you must make sure that you only sell as much of your structured settlement as you need to obtain the cash amount that you need.

Number three: Courts
In order to sell your structured settlement you are going to have to get it approved by the courts. In most cases, the judge is not going to deny your request to sell all or part of your structured settlement. Having to get this approved by the courts is a good thing because in order for the judge to approve your request the judge is going to examine the entire transaction and determine if it is going to be to your benefit to sell your structured settlement, the judge will also make sure that the sale will benefit your dependents. This approval process is a huge benefit because if the transaction is not going to be in your best interest the judge will deny the request and the company that is trying to buy your structured settlement will go back and change their offer to get the judge to approve the transaction.

Number four: Taxes
Whenever you get a lump sum of cash, you worry about how much you are going to have to pay in taxes. When you have a structured settlement the monthly payments that you are receiving are tax-free, so when you sell them people think the amount you sell them for should be tax-free as well, this is not always the case. The best thing that you can do to avoid having your lump sum of cash taxed by the government is to get the courts approval before you sell your structured settlement for quick cash. The reason for this is that majority of the times when you have the court's approval you will not be taxed on the money that you are receiving. Under federal law HR 2884, you are not going to end up owing taxes just because you decide to sell a structured annuity.

Here is a look at the cons of selling your structured settlement.

Number one: Discounted price
If you are going to be selling your structured settlement, you are going to have to sell it for a discounted price. In general, when you sell your structured settlement you will receive 10 to 15% less than what the structured settlement is actually worth. This is going to apply if you sell all or part of your structured settlement.

Number two: Taxes
If you do not follow the rules of selling your structured settlement, you can end up owing a lot of taxes on the money that you receive the lump sum portion. How much you are going to end up owing in taxes, if taxes are due, is going to depend on how much of the settlement you sold and how much you received for it. When selling your structured settlement you want to try to avoid having to pay taxes on the amount that you receive because that will take away from the amount of money that you are receiving, which means less cash in your pocket.

Number three: Amount
With selling a structured settlement for some quick cash, you have the choice of selling all or part of your structured settlement. The biggest problem that people have when selling their structured settlement is they sell too much of the settlement, meaning they get more cash than what they need. When people end up with extra cash, they usually end up spending it on stuff that they don't need or using it to put themselves further into debt. What you need to do is make sure that you only sell a portion of your structured settlement, so that you are only getting as much cash as you need to handle your financial emergency.

Number four: Time consuming
When people are in need of quick cash they are looking for something that they will be able to cash out in as little amount of time as possible. If you are selling, your structured settlement there is a long process that you must go through to get the structured settlement approved to be sold. The process of selling your structured settlement can take up to two months to finish, so that makes it one of the least attractive options for getting quick cash. However, most people who are currently receiving a structured settlement do not have any other means of raising capital to handle financial emergencies, so they must opt to wait for the time required to go through the process.

Number five: Court
Having to go through the courts to get your structured settlement approved can be very time consuming. Going through the courts also means that you run the risk of the judge denying your request to sell your structured settlement. Obtaining the approval of the courts is required at both the federal and state level, so regardless of what type of settlement you have you will need to go through this time consuming process. It is up to you to convince the judge that you need to sell your structured settlement; you have to prove your case to the judge. You will need to show the judge why selling your structured settlement is in your best interest and how it is going to benefit your family.

Number six: Laws
You will need to check into the laws in your state that govern selling structured settlements because not all states will allow you to sell a structured settlement. Currently about two-thirds of the states will allow you to sell a structured settlement, but all of them have different laws in place to regulate the sell of a structured settlement. These laws are put in place so that structured settlement companies cannot take advantage of people who are in need of quick cash. Another regulation that some states have in place is that if you are selling your structured settlement, you will need to obtain financial and tax advice before selling the settlement, so that you will make the best financial decision. There are also federal laws in place to help regulate the selling of structured settlements.

Number seven: Costs
Selling a structured settlement can be costly because you have to go through a two-month process that involves going to court to obtain a final approval. However, you can sometimes avoid these court fees because the settlement company might be willing to pay for them. In cases where the judge denies the initial request, companies that buy structured settlements will often pick up the tab to cover any expenses related to changing the transaction to meet the judge's approval; including the associated court costs. Another cost that can be included with selling your structured settlement is any taxes that you might owe.

Keep in mind that the insurance company that is in charge of your structured settlement can also be a roadblock when it comes to selling your structured settlement for cash. The reason for this is that they can protest the selling in court citing that payments cannot be assigned.