Sell Structured Settlement Finding Buyers and Pricing 3

Question 1

What is one way a payee can verify that a factoring company is licensed to operate in their state?

Accepted Answer

Check with the state's financial regulatory authority or department of financial institutions

Answer

State financial regulatory agencies maintain records of licensed structured settlement purchasing companies — checking directly with the regulator ensures the company is authorized to operate.

Question 2

A payee receives two offers: Company A offers $42,000 at a 15% discount rate, and Company B offers $40,000 at a 17% discount rate. Which offer should the payee prefer, all else being equal?

Accepted Answer

Company A because a lower discount rate means more money and a better deal for the payee

Answer

Company A's offer of $42,000 at a 15% discount rate gives the payee $2,000 more cash while also having a lower discount rate, making it clearly the superior offer.

Question 3

What is 'cherry-picking' in the structured settlement secondary market?

Accepted Answer

When a buyer selects only the most near-term or guaranteed payments to purchase, leaving the payee with less valuable future payments

Answer

Cherry-picking occurs when factoring companies want to buy only the near-term, guaranteed payments (the most valuable) while leaving the payee with distant, life-contingent, or smaller payments.

Question 4

Why might a payee choose to sell only a portion of their structured settlement payments instead of the entire stream?

Accepted Answer

To preserve some long-term income while accessing immediate cash for a specific need

Answer

A partial sale allows the payee to address a specific financial need while retaining future payments as ongoing income, balancing immediate cash needs with long-term financial security.

Question 5

Which of the following is an example of a legitimate reason courts typically accept for approving a structured settlement transfer?

Accepted Answer

Paying for necessary home repairs, medical procedures, or clearing high-interest consumer debt

Answer

Courts consistently approve transfers that address genuine necessity — housing, health, or debt relief — where the sale proceeds improve the payee's real financial position.

Sell Structured Settlement Practice Test

Sell Structured Settlement Practice Test

Sell Structured Settlement Finding Buyers and Pricing 3