Structured settlement is the reimbursement that is paid to an applicant for his injuries or losses. These reimbursements are paid by the defendant who is found guilty. The defendant agrees to pay an amount to the applicant that is less than what you owe in actual instead of taking the case in the court and increasing the expenses. This is usually more affordable for the defendant to settle. In case of a structured settlement in your favor, you will find two options. The first option is that you can receive your structured settlement in a lump sum structured settlement. The second option is that you can receive it in installments over a certain time period. This option is called a structured settlement. Bankruptcy, on the contrary, is when an individual is not able to repay the bank any money that he owes. However, there are certain times when these two apparently opposite conceptions overlap. When you file for chapter 13 bankruptcy, the non-dischargeable debts may be paid off with the help of chapter 13 bankruptcy repayment plan.
Structured Settlements and Bankruptcy
It can be quite troublesome to meet your daily expenses but it is much worse if you meet with an accident and have to pay the medical bills. This is one of the main reasons why structured settlements are becoming so famous in personal injury court proceedings. A defendant may keep aside a lump sum of cash that can be put into an annuity and invested. The annuity makes regular payments to the applicant to help out with the expenses. You may not have sufficient money to pay off all your medical bills even with a structured settlement. So, you may find that you have to file for bankruptcy.
The good news is that usually most of the states excuse structured settlements from the bankruptcy proceedings. So, even if your other assets may be at risk, your settlement will be unharmed. However, this is not the situation if you sell off all or part of your settlement for a lump sum amount. It is possibly that you would pay out the full lump sum before filing for bankruptcy. If this is the case, then the money will be gone as the structured settlement will also go away. Thus, prior to reaching a decision, you need to think whether or not selling off a structured settlement will be right for you.
The benefits of structured settlements
Other than its safety from bankruptcy, you should also take into consideration the benefits of structured settlements. Read on to know about the benefits of structured settlements.
- Investment made by the professionals – The structured settlements are usually controlled by the insurance companies. They have professional investment advisers who work to put the funds where they will be able to earn interest that is enough to make your payments. So, if an investment adviser tells you that he can manage your money in a better way, you should keep in mind that you have a professional who will take care of your money.
- Tax benefits – The structured settlement is excused from the income tax and the interest rate that is earned on your annuity as long as it is for a personal injury. So, if you sell off your structured settlement for a lump sum amount and invest it again, then the interest earnings will be fully taxable.
Apart from this, the interrupted payments that you get in a structured settlement stop you from spending all your hard-earned bucks too soon. Most of the lump-sum payments are eliminated within five years, and the applicant is left out with nothing. Thus, it can be said that a structured settlement enables you to keep yourself protected.
Kp: chapter 13 bankruptcy
