Can I Get a Loan on My Structured Settlement Payments?
May 18, 2012 – The rationale would appear on the surface to be very simple. You own an asset, periodic annuity payments as a result of a structured settlement, with real value. The payments are guaranteed by a highly rated insurance company and issued by a highly rated life insurance company. It then seems completely logical that you could walk into a bank and pledge the asset as collateral for a loan. After all, you probably have the payments automatically deposited into your bank account. It is not going to happen.
First, the owner of your structured settlement payments, an insurance company, would not acknowledge the bank’s lien on the policy or payments. Second, the issuer of your payments, the life insurance company, would not agree to redirect the payments to a third party such as a bank even if you instruct them to do so. While it is hard to argue that your payments would make great collateral there simply is not a legal mechanism in place for a bank to take possession of the right to receive the payments in the unfortunate event that you did default on the loan. The collateral is simply not saleable for a bank.
If you are reading this blog post or have watched daytime television for longer than thirty seconds in the last five years, then you have no doubt discovered there is a legal way to access liquidity from your structured settlement payments. Congress saw fit to enact legislation allowing you to sell your payments to a third party for a lump sum via a legal process. Federal law requires that the buyer of your payments petition a court and obtain a qualified order from a court of responsible jurisdiction pursuant to state law.
The financial crisis of 2008 unfortunately brought to light the fact that banks all too often act in their best interest and engage in highly speculative bets putting the entire global economy at risk. Conversely, when you sell your structured settlement payments for a lump sum, a judge must decide that doing so is in YOUR BEST INTEREST, taking into account the welfare and support of your dependents. In short, judicial approval is required. The law provides an advocate for you (the court) to ensure that the sale does not solve an immediate problem while creating another one down the line.
The bottom line is that there are reputable companies who will offer a good value for your structured settlement payments should you have a need for liquidity. You can even sell part of your payments: specifically, just enough to satisfy the immediate need while keeping the remainder of the payments intact to continue to provide a source of tax-free income. Banks cannot help, but you do have options.
Here at Annuity Transfers, Ltd. we are happy to answer any questions you may have regarding accessing liquidity from your structured settlement payments. Feel free to give us a call toll-free at 888-638-0900.