How to Sell Structured Settlement Payments You're Currently Receiving

What does it mean to sell payments you're receiving?

Selling structured settlement payments means transferring your right to receive some or all future periodic payments to a licensed purchasing company (called a “factoring company”) in exchange for a lump sum of cash paid to you now. Your payments must come from a finalized settlement — this is not a loan, and you do not repay anything.

The transaction is governed by both federal and state law. At the federal level, 26 U.S.C. §5891 imposes a 40% excise tax on the factoring company if the transfer is not approved by a court. This effectively makes court approval mandatory for all legitimate transactions. Every state except Wisconsin and New Hampshire has also enacted its own Structured Settlement Protection Act requiring court review.

How much can you get for your payments?

Your lump-sum offer depends on three factors: the total face value of the payments you're selling, the discount rate the buyer applies, and any fees charged. Industry discount rates typically range from 9% to 18% APR. A competitive rate for guaranteed payments from a rated insurance company is generally below 12%.

Full sale vs. partial sale: which is right for you?

You are not required to sell all of your payments. A partial sale lets you sell a specific portion while continuing to receive the rest. This preserves long-term income while giving you immediate cash for a specific need.

What is the court-approval requirement?

Every legitimate structured settlement sale must be approved by a state court judge. Under 26 U.S.C. §5891, the judge must find that the transfer “does not contravene any Federal or State statute” and “is in the best interest of the payee, taking into account the welfare and support of the payee's dependents.”

If a buyer tells you they can skip court approval or offers an “instant” transfer, that is a red flag. Without court approval, the buyer faces a 40% excise tax — legitimate companies will always go through the court process.

How long does the process take?

From signing a purchase agreement to receiving your lump sum typically takes 45 to 90 days. The timeline depends primarily on your state's court schedule. Some states (like Florida) can move as fast as 30–45 days, while others may take 60–90 days.

Are there taxes on the lump sum?

Generally, no. If your original settlement payments were tax-free (as they typically are for personal injury and workers' compensation under IRC §104(a)(1) and §104(a)(2)), the lump sum you receive from selling remains tax-free to you. Section 5891(d) explicitly states that a court-approved transfer does not change the tax treatment.

However, if your settlement payments were not originally tax-exempt (e.g., punitive damages), the tax treatment may differ. Always consult a tax professional.

How to avoid lowball first offers

Honest downsides of selling your payments

Selling is not right for everyone. You will always receive less than the full face value. Once sold, those payments are gone permanently. If you sell all your payments, you lose a guaranteed income stream designed to support you long-term. And the process takes 45–90 days, so it is not a source of emergency cash within days.