Structured Settlement Funding vs. Lump Sum Payment: Which is Better?

Structured Settlement Funding vs. Lump Sum Payment: Which Is Better?

When you or a loved one successfully prove your personal injury case and the court gives you a favorable decision, you may be faced with the choice of accepting a lump sum payment from the defendant or choosing a structured settlement arrangement. But how does each of these options work, and how do you know which one is right for you? Which is the best choice if you have incurred a lot of debt and need to access your settlement money right away? Learn the advantages and disadvantages of structured settlements versus lump sum payments and see when opting for a settlement funding option may be a good idea.

What Is a Structured Settlement?

A structured settlement is an agreement between the plaintiff and the defendant in a legal dispute, such as a personal injury case. In a structured settlement agreement, the defendant agrees to make regular payments to the plaintiff for a specified period of time. Payments can be made monthly, annually, or at other intervals.

Structured settlements may provide a steady stream of income for the plaintiff and can be advantageous from a tax perspective, as payments originating from a structured settlement are tax-free. Structured settlement payments are guaranteed and may offer some financial security over time, and can be especially beneficial in cases where the plaintiff obtains a high-dollar settlement of $150,000.00 or more.

What Is a Lump Sum Payment?

As the name indicates, a lump-sum payment is a single payment of the entire amount of the plaintiff’s settlement. This form of payment is what most of us think of when contemplating the idea of a personal injury settlement. A lump-sum payment is usually an option for lawsuits yielding less than $150,00.00 for the plaintiff and can be beneficial as it provides a quick way for the plaintiff to access financial resources needed to cover their damages, such as medical bills and lost wages.

Plaintiffs who have incurred significant economic losses as a result of their injuries often choose to receive a lump-sum payment to pay off their debts and avoid damage to their credit. On the other hand, if a plaintiff is awarded a large sum in damages – such as $500,000.00 or more – getting a lump sum payment of such a large amount of money may pose some risks, as they may often spend their settlement money too fast and end up lacking financial resources later on.

How Does Structured Settlement Funding Work?

It is important to be aware of how structured settlements and lump-sum payments work because once you make a decision and put it all on paper, the court will not go back and change it. So, if you choose a structured settlement over a lump sum payment, you can’t change your mind once the payments start coming. But life happens, and sometimes, you need a way to access the rest of your settlement money quickly without waiting for payments.

This is where structured settlement financial alternatives may come as an option. Structured settlement funding is a way for plaintiffs who have chosen to receive a structured settlement to access their settlement money more quickly. With this arrangement, you can sell some or all of your structured settlement payments to a third-party company. In turn, you can receive a lump sum of cash upfront. This lump sum of money can then be used for whatever you need, such as paying off debts, paying for medical treatments, or covering living expenses. Blue Fox Funding, LLC offers a variety of financial solutions for plaintiffs, such as pre-settlement funding and funding from structured payouts.

Which Should I Choose: Structured Settlement Funding or a Lump Sum Payment?

Choosing whether to receive a lump-sum payment or enter into a structured settlement agreement can be complicated, but the best way to decide is to look at the specific circumstances of your case. Consider all of the expenses you may have incurred as a result of your injury or while your case was pending in court. If your expenses resulted in a significant amount of debt that needs to be paid off urgently, then maybe a lump-sum payment may be the right choice for you, especially if the amount you are receiving is not more than a couple thousand dollars.

On the other hand, if you have no urgent outstanding debts that could hurt your credit and you can afford to wait for structured settlement payments to arrive on a regular basis, getting a structured settlement may provide you with a reliable stream of tax-free income and help you use your settlement money wisely. A structured settlement is more akin to a long-term investment, so it is helpful for you to view it that way and see how it aligns with your immediate financial needs.

Finally, if your circumstances change and you find yourself in need of a sudden windfall of cash to cover unexpected expenses, consider reaching out to Blue Fox Funding, LLC, and asking about a structured settlement funding option. At Blue Fox Funding, LLC, you can find many risk-free solutions to access your settlement money when you need it most. We have helped countless plaintiffs in Minnesota to afford their medical bills and living expenses while waiting for their cases to settle. Contact us at 800-774-7106 to learn more and see how we can help you.