With all the scandal and intrigue that followed the fall of Scott Rothstein in early November, it was easy to gloss over the precise instrument he used to commit his billion-dollar-plus fraud. Even for former U.S. Attorneys, like Kendall Coffey. When he sued Rothstein on the firm's behalf, Coffey incorrectly alleged that Rothstein had fabricated "structured legal settlements" as an enticement to investors.
"These things were not structured settlements," says John Darer, who is a structured settlement broker based in Connecticut and writes a blog about the industry. "The kind of rates of return (investors) were promised is not what you'd get from a structured settlement. These were clearly pre-settlement funding deals."
Rothstein was purporting to engage in "legal funding," whereby plaintiffs sell their future reward in a lawsuit to an investor. In traditional structured settlements, investors have no role.
Another important difference, says Darer,
is that in a traditional brokered settlement, "There has to be a release of liability" on behalf of the plaintiff in a civil suit. "But they were not doing that in Rothstein's case," says Darer. "He was having somebody buy the client's interest out of the case." Last month, in an effort to distinguish Rothstein's scam from the structured settlement industry, Darer taped a video with another professional in the field,
Source
Thursday, January 28, 2010
Monday, July 20, 2009
Freedom Debt Relief Doubles Consumer Debt Settlements
San Mateo, CALIF. May 15, 2009 -- Indicating that the current consumer credit crisis is far from over, the amount of debt Freedom Debt Relief has settled for clients rose to more than $87 million for the period of Jan. 1-April 30, 2009, which is more than double the debt settled for the same period in 2008, and which represents an annual run rate of more than a quarter of a billion dollars.
During the first four months of this year, Freedom Debt Relief settled 15,010 creditor accounts for its clients - an increase of more than 50 percent over the same period in 2008. The average settlement FDR has achieved for its clients this year is approximately 42 percent, nearly a 5 percent improvement over the same period in 2008. That translates to average savings of 58 percent of total debt balances at the time of settlement (before program fees).
More people are turning to structured debt relief programs as the economy repositions to weather the current storm Debt settlement firms, such as Freedom Debt Relief, negotiate on the consumer's behalf with creditors, and offer an alternative to credit counseling, debt consolidation and bankruptcy. The firms negotiate with creditors, and typically can reduce a consumer's principal balance due -- rather than just interest rates -- with a settlement term of two or three years. Debt settlement, explained Andrew Housser, co-CEO of Freedom Debt Relief, is best suited for individuals with serious debt hardship who are struggling to make required minimum payments and who would otherwise be considering bankruptcy or credit counseling.
"More people are turning to structured debt relief programs as the economy repositions to weather the current storm," said Housser. "At the same time, as we are seeing through continually increasing traffic to our financial portal, Bills.com, consumers are looking to make the most of their money. More people are seeking tips and information about credit cards, credit scores and debt relief to help set their course."
Source
During the first four months of this year, Freedom Debt Relief settled 15,010 creditor accounts for its clients - an increase of more than 50 percent over the same period in 2008. The average settlement FDR has achieved for its clients this year is approximately 42 percent, nearly a 5 percent improvement over the same period in 2008. That translates to average savings of 58 percent of total debt balances at the time of settlement (before program fees).
More people are turning to structured debt relief programs as the economy repositions to weather the current storm Debt settlement firms, such as Freedom Debt Relief, negotiate on the consumer's behalf with creditors, and offer an alternative to credit counseling, debt consolidation and bankruptcy. The firms negotiate with creditors, and typically can reduce a consumer's principal balance due -- rather than just interest rates -- with a settlement term of two or three years. Debt settlement, explained Andrew Housser, co-CEO of Freedom Debt Relief, is best suited for individuals with serious debt hardship who are struggling to make required minimum payments and who would otherwise be considering bankruptcy or credit counseling.
"More people are turning to structured debt relief programs as the economy repositions to weather the current storm," said Housser. "At the same time, as we are seeing through continually increasing traffic to our financial portal, Bills.com, consumers are looking to make the most of their money. More people are seeking tips and information about credit cards, credit scores and debt relief to help set their course."
Source
Monday, July 13, 2009
Taxes and structured settlements
In structured settlements, injury compensation is paid in installments over years rather than as a lump sum up front. It has long been argued that arrangements of this sort should be strongly favored by public policy: many accident settlements are premised on the need to cover years of needed therapy or future income lost through disability, and if it’s spent down too quickly through mishandling or “lottery winner syndrome”, the victim could wind up an expensive public charge. For reasons of this sort, structured settlements have been accorded highly favorable tax treatment.
Then an industry sprang up that offered to turn structured settlements into quick cash on the barrel, a choice that many lawsuit beneficiaries might be tempted to make (or might make after being leaned on by family members). Although laws often require that conversions of this sort be submitted for review to a court, judicial review may be cursory in the absence of adversary process to call attention to the potential drawbacks of a conversion. Not only has the structured-settlement-conversion industry managed to thrive, but somehow, as Shaun Martin notes, Congress has even been prevailed on to bestow favorable tax treatment on its doings — the same doings that tend to undermine the public benefits thought to arise from the original tax-favored structured settlement. More details are to be found in this decision, PDF, in which an appeals court recently sided with the factoring companies in a series of Fresno, California disputes (also discussed at this new blog on structured settlements, via Dan Schwartz).
Source
Then an industry sprang up that offered to turn structured settlements into quick cash on the barrel, a choice that many lawsuit beneficiaries might be tempted to make (or might make after being leaned on by family members). Although laws often require that conversions of this sort be submitted for review to a court, judicial review may be cursory in the absence of adversary process to call attention to the potential drawbacks of a conversion. Not only has the structured-settlement-conversion industry managed to thrive, but somehow, as Shaun Martin notes, Congress has even been prevailed on to bestow favorable tax treatment on its doings — the same doings that tend to undermine the public benefits thought to arise from the original tax-favored structured settlement. More details are to be found in this decision, PDF, in which an appeals court recently sided with the factoring companies in a series of Fresno, California disputes (also discussed at this new blog on structured settlements, via Dan Schwartz).
Source
Monday, July 6, 2009
Settlement company files for Chapter 11
A Delaware Valley company known for its sometimes humorous TV advertising of lump sum payments for insurance settlement checks is looking for a settlement of its own.
J.G. Wentworth announced that three of its non-operating parent holding company level affiliates – JGW Holdco, LLC, J.G. Wentworth LLC, and J.G. Wentworth, Inc., -- have filed reorganization plan under Chapter 11 of the U. S. Bankruptcy Code in U. S. Bankruptcy Court, Wilmington.
Wentworth has been affected by turmoil in the financial markets that makes it difficult to finance the conversion of insurance settlements from traffic accidents, annuities and other events from monthly checks to lump sum payments.
The filing is what is known as a prepackaged Chapter 11 that has most creditors signing on to a debt restructuring deal.
Over 90% of the term lenders approved the plan that will allow the company to substantially reduce its debt load at the parent holding company level while providing the enterprise with $100 million of new equity to support ongoing operations. Its operating units will continue to conduct business without interruption during the reorganization process, which is expected to be completed within 30 days.
J.G. Wentworth’s decision to file for Chapter 11 followed a eview of alternatives to address pressures from extremely challenging capital markets and high borrowing costs, and was unanimously approved by the company’s board of directors.
David Miller, Chief Executive Officer, said, "J.G. Wentworth serves a very important market niche, and we have successfully provided liquidity to tens of thousands of customers over the years. However, we have recently faced significant challenges due to the well-published disruption of the ABS market. After careful review, we made the decision to restructure the business through a Chapter 11 filing so that we can strengthen our balance sheet and be better positioned for the future. I am excited by the potential at J.G. Wentworth and believe that by taking the appropriate actions now, this business will move forward effectively. A strengthened J.G. Wentworth will offer customers more options as they seek cash for their illiquid assets, with the same great service they’ve come to expect.”
Since only senior term debt at the parent holding company level is being affected and DIP financing has been contracted for, customers completing a transaction with J.G. Wentworth will not be impacted by the filing, he said.
Since 1992, J.G. Wentworth has purchased over $3 billion of future payment obligations from consumers and is also the nation’s largest securitizer of structured settlement and annuity backed notes.
Source
J.G. Wentworth announced that three of its non-operating parent holding company level affiliates – JGW Holdco, LLC, J.G. Wentworth LLC, and J.G. Wentworth, Inc., -- have filed reorganization plan under Chapter 11 of the U. S. Bankruptcy Code in U. S. Bankruptcy Court, Wilmington.
Wentworth has been affected by turmoil in the financial markets that makes it difficult to finance the conversion of insurance settlements from traffic accidents, annuities and other events from monthly checks to lump sum payments.
The filing is what is known as a prepackaged Chapter 11 that has most creditors signing on to a debt restructuring deal.
Over 90% of the term lenders approved the plan that will allow the company to substantially reduce its debt load at the parent holding company level while providing the enterprise with $100 million of new equity to support ongoing operations. Its operating units will continue to conduct business without interruption during the reorganization process, which is expected to be completed within 30 days.
J.G. Wentworth’s decision to file for Chapter 11 followed a eview of alternatives to address pressures from extremely challenging capital markets and high borrowing costs, and was unanimously approved by the company’s board of directors.
David Miller, Chief Executive Officer, said, "J.G. Wentworth serves a very important market niche, and we have successfully provided liquidity to tens of thousands of customers over the years. However, we have recently faced significant challenges due to the well-published disruption of the ABS market. After careful review, we made the decision to restructure the business through a Chapter 11 filing so that we can strengthen our balance sheet and be better positioned for the future. I am excited by the potential at J.G. Wentworth and believe that by taking the appropriate actions now, this business will move forward effectively. A strengthened J.G. Wentworth will offer customers more options as they seek cash for their illiquid assets, with the same great service they’ve come to expect.”
Since only senior term debt at the parent holding company level is being affected and DIP financing has been contracted for, customers completing a transaction with J.G. Wentworth will not be impacted by the filing, he said.
Since 1992, J.G. Wentworth has purchased over $3 billion of future payment obligations from consumers and is also the nation’s largest securitizer of structured settlement and annuity backed notes.
Source
Monday, June 29, 2009
How Structured Settlement Annuities are Created, Sold, & Purchased
A structured settlement is an agreement between parties which generally results in an insurance entity committing to make tax-free payments to an individual for an agreed upon period of time or for the life of the individual. Structured Settlements are based on a financial plan for immediate cash and future tax-exempt payments which take into consideration the future needs of the injured party. Structured Settlements are also designed by the plaintiff in order to maximize their settlement by receiving secure and tax-free payments.
Upon reaching a settlement which includes the requirement of future periodic payments, the Plaintiff often requires the Defendant to transfer its obligation to make these periodic payments to a subsidiary or affiliate of an insurance company (often referred to as an assignment company). The Defendant or its liability insurance carrier pays the assignment company an agreed amount of money in a lump sum in exchange for its agreement to assume this periodic payment obligation. The assignment company uses this lump sum to purchase an annuity from an insurance company which is often affiliated with, or a parent of, the assignment company. After the assignment, the assignment company or the insurer will make all of the periodic payments directly to the Plaintiff.
Each insurance company is regulated through state insurance commissions, who mandate the repayment of these annuities as claims paying obligations. In addition, each state has a specific limited guarantee or fund for repayment in the event that an insurance company is unable to meet their obligations. Physical, personal injury settlement payments are generally received tax-free by an injured person by reason of Section 104 Internal Revenue Code. With a qualifying structured settlement, the individual receives a tax-free accrual of interest for the life, or term, of the annuity. In this manner, the injured person becomes the payee of a Structured Settlement, which generates payments at a fixed rate, for a fixed term.
In some instances, the individual annuitant who is receiving periodic payments under a Structured Settlement desires to sell some or all of their future payments for a lump sum of money. The cash flows are sold at a discount in exchange for the lump sum payment, and this discounted Structured Settlement is available for sale to the Purchaser. This manner of securing the payment streams at a discount directly from the seller is how the Purchaser secures such favorable yields. Financial brokers normally facilitate this transaction on behalf of the seller (or annuitant) and the purchaser.
Source
Upon reaching a settlement which includes the requirement of future periodic payments, the Plaintiff often requires the Defendant to transfer its obligation to make these periodic payments to a subsidiary or affiliate of an insurance company (often referred to as an assignment company). The Defendant or its liability insurance carrier pays the assignment company an agreed amount of money in a lump sum in exchange for its agreement to assume this periodic payment obligation. The assignment company uses this lump sum to purchase an annuity from an insurance company which is often affiliated with, or a parent of, the assignment company. After the assignment, the assignment company or the insurer will make all of the periodic payments directly to the Plaintiff.
Each insurance company is regulated through state insurance commissions, who mandate the repayment of these annuities as claims paying obligations. In addition, each state has a specific limited guarantee or fund for repayment in the event that an insurance company is unable to meet their obligations. Physical, personal injury settlement payments are generally received tax-free by an injured person by reason of Section 104 Internal Revenue Code. With a qualifying structured settlement, the individual receives a tax-free accrual of interest for the life, or term, of the annuity. In this manner, the injured person becomes the payee of a Structured Settlement, which generates payments at a fixed rate, for a fixed term.
In some instances, the individual annuitant who is receiving periodic payments under a Structured Settlement desires to sell some or all of their future payments for a lump sum of money. The cash flows are sold at a discount in exchange for the lump sum payment, and this discounted Structured Settlement is available for sale to the Purchaser. This manner of securing the payment streams at a discount directly from the seller is how the Purchaser secures such favorable yields. Financial brokers normally facilitate this transaction on behalf of the seller (or annuitant) and the purchaser.
Source
Monday, June 22, 2009
Credit Card Debt Consolidation - The Best Way to Erase Debts
Everyone who is or has been in debt knows how easy it is to land up in this situation. Common activities like buying a new home or car, paying for education, or shopping for expensive cloths can all put you in such a situation. These people also know that contrary to getting into debt, getting out of debt is a lot more difficult. Of all the debts, credit card debt is the most common form of debt.
So what is the solution? The solution lies in Credit Card consolidation. It is easily one of the best and easiest ways to get rid of all your debts. Credit Card Consolidation clubs or consolidates debts into one account. The advantages are many - for one, debt consolidation means more convenience – taking care of one account is many times easier than taking care of multiple accounts. Another advantage is the instant stopping of collection and creditors calls resulting in more peace of mind.
Over limit and late fees are generally withdrawn – at times this withdrawal itself results in reducing the amount of debt to a large extent. And most importantly, there is usually a decrease in the minimum payment and interest rates – translating in better suitable payment plans and lesser payments towards interest.
While opting for credit card debt consolidation, it is imperative to seek help from a reputed debt-consolidation company. Such companies have professionals who know exactly what to do and take good care of your finances. Usually these companies have various solutions that help you to get rid of your debts. You can choose to pay back your debt within a few months (12-16 months) or over a longer period of time (5-7 years or even more than that), the choice is ultimately yours.
Choosing a Credit Card debt consolidation firm is a wise decision to make, it not also makes your debt-freedom path more structured, but also easier.
Source
So what is the solution? The solution lies in Credit Card consolidation. It is easily one of the best and easiest ways to get rid of all your debts. Credit Card Consolidation clubs or consolidates debts into one account. The advantages are many - for one, debt consolidation means more convenience – taking care of one account is many times easier than taking care of multiple accounts. Another advantage is the instant stopping of collection and creditors calls resulting in more peace of mind.
Over limit and late fees are generally withdrawn – at times this withdrawal itself results in reducing the amount of debt to a large extent. And most importantly, there is usually a decrease in the minimum payment and interest rates – translating in better suitable payment plans and lesser payments towards interest.
While opting for credit card debt consolidation, it is imperative to seek help from a reputed debt-consolidation company. Such companies have professionals who know exactly what to do and take good care of your finances. Usually these companies have various solutions that help you to get rid of your debts. You can choose to pay back your debt within a few months (12-16 months) or over a longer period of time (5-7 years or even more than that), the choice is ultimately yours.
Choosing a Credit Card debt consolidation firm is a wise decision to make, it not also makes your debt-freedom path more structured, but also easier.
Source
Monday, June 15, 2009
Is selling a structured settlement a good investment decision?
In nine cases out of ten, selling a structured settlement is not a good investment decision. Ideally, selling a structured settlement for cash should be the last alternative and should be resorted to only if the individual is confident of managing his own investment portfolio in a competent manner. This is because in any sale of a structured settlement, it is possible to lose up to half of the long-term value of the structured settlement.
A structured settlement offers guaranteed payment that is tax-free; this may not be the case with investments made by selling a structured settlement. Moreover, the regular payments offered by a structured settlement are a source of great comfort to retired individuals and those with an impaired earning ability. A structured settlement offers the advantage of a regular income without having to worry about managing it.
If one has sufficient business experience and is confident of himself, he can use the money obtained from the sale of a structured settlement as capital, and the money can also be used to make intelligent real estate purchases. In case, an individual has to sell his structured settlement, he should try and sell as few payments as would be required to get his work done. Exchanging the security of structured settlement payments for another investment plan has its risks and one should consider alternatives in collaboration with a financial advisor. An advantage of investing money obtained from selling a structured settlement is that one gains control of his own finances; with a structured settlement, the control is largely in the hands of lawyers and companies that pay the settlements.
Selling structured settlements can be particularly detrimental to individuals who are disabled, minors, workers compensated for loss, and compensation due to severe injury.
Source
A structured settlement offers guaranteed payment that is tax-free; this may not be the case with investments made by selling a structured settlement. Moreover, the regular payments offered by a structured settlement are a source of great comfort to retired individuals and those with an impaired earning ability. A structured settlement offers the advantage of a regular income without having to worry about managing it.
If one has sufficient business experience and is confident of himself, he can use the money obtained from the sale of a structured settlement as capital, and the money can also be used to make intelligent real estate purchases. In case, an individual has to sell his structured settlement, he should try and sell as few payments as would be required to get his work done. Exchanging the security of structured settlement payments for another investment plan has its risks and one should consider alternatives in collaboration with a financial advisor. An advantage of investing money obtained from selling a structured settlement is that one gains control of his own finances; with a structured settlement, the control is largely in the hands of lawyers and companies that pay the settlements.
Selling structured settlements can be particularly detrimental to individuals who are disabled, minors, workers compensated for loss, and compensation due to severe injury.
Source
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