Using Your Structured Settlement as Collateral for a Bank Loan
According to the National Structured Settlement Trade Association (NSSTA) “Normally, you may not use your structured settlement payments as collateral for a loan. The reason is that the federal law designed to provide these benefits to you on an income tax-free basis also prohibits you from assigning or encumbering them”.
The National Association of Settlement Purchasers (NASP) states, “That is an option, if you have good credit and are willing to take on additional debt.” The NASP also adds, “Unfortunately, few banks will take your payments as collateral. That is because even using your payments as collateral is considered a transfer that must be approved by a judge.
Banks typically don’t want to go to the expense and inconvenience of getting court approval just to issue a loan.
What’s more, a company that purchases or loans against structured settlement payments must agree to take on certain obligations from the insurance companies’ litigation expenses if there is ever a lawsuit relating to the transaction (called an indemnity). Most banks are unwilling to take on these obligations.” (NASP)
Your other choice would be to sell some or your entire payment stream. Call an independent professional advisor today and explore other options. Independent professional advisors versed in this area of law are trained professionals who know the answers to your questions.
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