Structured Settlements Explained – in Plain English

After having supported a dear friend of mine while he went through a long, tiring and somewhat terrifying experience of suing a company, I have come to learn certain legal terms that may be useful for all of us; in particular the idea of structured settlements and even people who want to buy structured settlements.

I’ll begin with the questions “What are structured settlements” and “why would people wish to sell or buy structured settlements”.

If suing someone either for damages, compensation of any sort, physical or mental injuries and you won the case, your opponent is now liable to pay you financial compensation. Generally this would be a lump sum payment, such as $200,000 at once. A structured settlement however is similar to refinancing, where you agree on the terms of the compensation but receive it in allotments either weekly or monthly, or even annually. It is exactly what the name suggests; you “settle” the amount in “structured” payments. So instead of a lump sum $200,000, you can refinance it to $1000/ week over a period of 200 weeks.

Now we answer the question “why would people wish to sell or buy structured settlements?” If we maintain the original example of $1000/week throughout 200 weeks, what if the settler now wished to receive the final $100,000 after only the first 100 weeks? There are many people willing to buy structured settlements, but at a discounted rate so they earn a nice profit also. An example would be selling the final 100 weeks worth $100,000 to a buyer for $80,000. The seller receives a lump sum that he requires, and the buyer is able to earn a profit of $20,000 over the next 100 weeks.

I hope this clears up a lot of confusion for those going through or will be going through the terrifying experience of legal matters in the future.