The shocking truth about when you should and should not sell structured settlements.

According to US News and World Report, more than $5 billion in structured settlements are awarded each year.

Many people who have received a structured settlement to compensate them for injuries are being preyed upon by unscrupulous "factoring companies", also known as structured settlement buyers. These companies buy the rights to settlements discount prices, usually 50% to 75% of present value in some cases. This frequently causes financial hardship for many of the people who don't have sufficient financial education.

While true, a more important reason for the coalition is because the companies fear that these buyouts threaten the favorable tax treatment given to the parties (particularly the insurance and annuity companies) under a structured settlement if the periodic payment rights are sold to another.

Most structured settlement buyers provide consumers with a valuable alternative to time spaced payments. Typically the agreement between the tort claimant seller and the payment rights buyer will have the following conditions.

Seller has received independent tax and accounting advice and legal representation, or has waived legal representation.

Seller agrees to forego favorable tax treatment and acknowledges that sale may result in increased income taxes paid by the seller.

The purchase agreement is confidential proprietary information belonging to the buyer.

The seller agrees not to sue and expressly waives jurisdiction and standing to bring suit under the contract, and further agrees to indemnify and hold harmless the buyer if any suit is brought by the seller or on the seller's behalf contesting the sale for any reason (including fraud).

The seller is responsible for paying the buyer's attorney's fees and costs if the purchase agreement is not completed, after a three-day cooling-off period, because the seller later changes his or her mind.

Brokerage fees paid by the buyer shall be added to the purchase price for purposes of calculating the seller's rate of return or the discount rate applied to the transaction. (The effect is to distort the net cash benefits to the seller, making it appear as if the seller were netting a higher return in the sale.)