Sell Structured Settlement The Selling Process 1

Question 1

What is the term for a company that purchases structured settlement payment rights from a payee?

Accepted Answer

Factoring company

Answer

Factoring companies (also called purchasing companies) buy the right to receive future structured settlement payments from the payee in exchange for an immediate lump sum.

Question 2

When a payee sells their structured settlement payments, they typically receive:

Accepted Answer

A discounted lump sum less than the total value of future payments

Answer

Factoring companies apply a discount rate to calculate a present value, meaning the lump sum offered is always less than the total of all future payments.

Question 3

What is the 'discount rate' in the context of selling structured settlement payments?

Accepted Answer

The rate used to calculate the present value of future payments

Answer

The discount rate is applied by the factoring company to convert future payment values into a present lump-sum amount, representing the buyer's profit margin.

Question 4

What is the first step a payee should typically take when considering selling their structured settlement?

Accepted Answer

Consult an independent financial advisor or attorney

Answer

Before agreeing to any sale, payees are strongly advised to consult an independent financial advisor or attorney to fully understand the long-term financial implications.

Question 5

Which document formally transfers the rights to structured settlement payments to a factoring company?

Accepted Answer

Purchase and sale agreement (transfer agreement)

Answer

The purchase and sale agreement (also called a transfer agreement) is the contract between the payee and the factoring company specifying the payments being sold and the lump sum to be paid.

Sell Structured Settlement Practice Test

Sell Structured Settlement Practice Test

Sell Structured Settlement The Selling Process 1