It is common knowledge that a lawsuit settlement can absorb considerable amounts of time and financial resources, that is why some financing entities buy a part of the plaintiff’s anticipated settlement to keep them from going bankrupt. If the person who has placed the lawsuit is victorious and the judge awards a settlement to be paid to the plaintiff, then a second set of problems arise.
These problems are usually overlooked by the person receiving the monetary instrument due to the fact that the lawsuit has settled and everything is assumed to go back to normal, but the truth is that now the plaintiff has to deal with a structured settlement until the amount owed is paid in full.
The problem about structured settlements is that the person will not receive all the full value of the instrument as a lump sum, in other words if the plaintiff needs to pay medical bills due to accidents in the workplace, which are the most popular reason people file lawsuits against companies, the patient who was just awarded a structured settlement, won’t have the financial means to cover this liability at once.
Many times people who are awarded structured settlements after a lawsuit have many other needs which may not be covered by receiving small periodical installments. The lawsuit process can take many financial resources and sometimes the plaintiff is in a tough spot and is in need to tap into their house equity to help ease the financial pain. The fact is that refinancing a property in order to cover lawsuit expenses is not a smart decision, especially if the interest rates and payments will go sky-high after signing all the documents.
This is how many people who have been awarded structured settlement payments have lost their houses. These two types of bills are too large to be covered by small monthly payments. To this we can add, all the regular expenses the plaintiff may have, for example: car payments, tuition, second mortgage payments, utility, etc.
As you can see all these expenses can pile up and over time a simple monthly payment is not enough, that is why lump sums represent a much better choice in these situations. As the phrase implies, lump sums grant the full value of the structured settlement, which can be used by the plaintiff immediately.
Another good reason to convert structured payments into a lump sum is the fact that with the earlier mentioned, clients loose the value of the instrument over time, due to inflation and such. Interest is also lost by receiving periodical payments.