Structured Settlement Transfer: Will the Judge Say Yes or No?
For your structured settlement transfer to go through and be valid, it must be approved by a judge in court, and you may have to show up in court personally along with your legal representative and the buying company.
The reason that a hearing in court is required is for your protection to ensure that "factoring companies" (who buy out structured settlement payments) is not taking advantage of you and charging a very high rate that is not considered to be in your best interest.
If a buyer offers to purchase your settlement payments without a court-order
If a structured settlement buyer is attempting to get around the court approval and enters in a private agreement with you to sell them your structured settlement payments, an excise tax of 40% may be imposed on the profits that the buying company is earning from your structured settlement transfer, i.e. the difference between the future value of your aggregate payments and the amount that the company is paying out to you for selling the payments (that is much less than what you would get in the future periodic payments).
When a structured settlement buyer is offering you to circumvent the law and sell them your settlement payments without a court order - RUN away. Do not agree to this, and refuse to do any business with the company who may be dishonest and involved in fraudulent and illegitimate activity.
Scheduling a court hearing date - the long wait
After agreeing on a deal and signing documents, the structured settlement buying company will file a court petition and schedule a hearing through their or your attorney.
The scheduled day in court will typically be between 30 days (if you are lucky) and 45 to 60 days, and in some cases even longer. Only in rare cases may you be able to get a sooner date.
The scheduling also depends on the state and county where the petition is filed. In states like New York it may be harder and take long to get a court date. In some NY counties, however, you may still succeed in getting a date sooner.
Waiting for the court: are you still interested?
The waiting time for the court date may be an important aspect to consider when thinking about a structured settlement tansfer.
After all, you are selling your valuable structured settlement payments because you are in need of money now. Perhaps you are facing an eviction, or having to pay off debts, and are dependent on immediate funds, but if the court hearing can't be scheduled before some time, you'll have to decide if the deal is still worthwhile to you.
Likewise, it may not be in the interest of the structured settlement buyer to purchase your payments if it will take too long to schedule a court date, as the buyer may need to deposit the lump sum money for you in an escrow account and leave it there until the approval and closing of the transfer deal.
Be patient: getting a court date does take some time
Keep in mind....
- The court hearing is scheduled in between a month and 45 days or so in most cases
- You can not legitimately sell your structured settlement without a court hearing and approval
- Your attorney or the buying company may do their best to try finding the nearest date possible, but it may not be in anyone's control to get an earlier court date
- You may want to ask for a cash advance from the company buying your payments enabling you to have access to at least some cash to use while waiting for the court approval
What the Judge May Ask You
Here's what you may be asked by a judge in the courtroom when seeking approval for the settlement transfer:
- How much do you earn for a living?
- What are your sources of income?
- What is the reason for selling your structured settlement payments?
- What will you use the lump sum money for?
- How will you support yourself and your dependents following the sale?
- Were you given a full written disclosure and oral explanation of the structured settlement transfer process and rates by the buyer?
- Did you seek outside and independent advise in regard to the sale decision?
- What is the discounting rate and the amount you will be paid for selling your structured settlement payments?
You may need to provided supporting papers, affidavits and documents supporting your claims, including proof of income and evidence for the reasons that you need the money presently.
Note: while structured settlement buyers may be doing their best in getting through the transfer process quickly and smoothly, doing the paper work and scheduling the court hearing, some unforeseen problems may emerge during the process, such as an important paper being misplaced and having to be relocated, or the court date being delayed for some reasons, and not everything could be prevented beforehand.
What counts, however, is how well the company is doing in solving matters quickly and doing everything in their capacity to speed the process and get you the money as quickly as possible.
If a structured settlement buying company offers to bypass the court order that is now required by most if not all States in the US to buy out your payments, refuse and do not deal with that buyer.
Make sure that the buyer is active and working in your interest and not dragging on time for no valid reason. If the company fails to return your calls and answer your questions tell them good buy and look elsewhere to sell your settlement payments.
Considerations for approving or declining your transfer
Will the judge approve of your structured settlement transfer or decline the transaction?
It depends on a number of factors, including the following:
- The original terms of the structured settlement agreement you as a plaintiff signed with the defendant
- Your welfare, financial status and ability to support yourself and your dependents
- Your ability to handle the lump sum money
- The reason why you are doing the structured settlement transfer
- The price and discount rate applied to the transfer
- Whether the structured settlement transfer is in contravention to court orders and government statutes
- Whether you have already done transfers of your structured settlement payment rights in the past
- The structured settlement buying companies you dealt with in such past transfers
Prepare, don't despair
Appearing before the judge, you may be asked some questions linked to the structured settlement transfer. Your answers may play a role in the judge's decision to authorize or turn down your transfer request.
There is no reason to be anxious once you have a good reason for selling payments and you know the sale is in your interest and you'll be able to manage the capital and support yourself following the transfer.
Some reasons for turning down your cash out petition
Here are some reasons a judge may in some cases say no and refuse to approve of your structured settlement cash out:
- The judge believes the structured settlement transfer is not in the best interest of you or your dependents
- You have sold in the recent past a sizable portion of your structured settlement payments
- The discount rate, i.e. the price offered by the buying company to pay for your structured settlement payments is too high
- The structured settlement transfer contravenes court verdicts, federal or state laws, there's objection to the sale by the annuity issuer, or there are provisions in the original settlement agreement against transferring the payment rights
- You have not been advised by the structured settlement buyout company to get independent financial advice on the transfer or the indication to do so has not been waived by you
- The written documentation of the transfer contract fails to mention the discount rate applied to the payment rights assignment
- You have not provided sufficient evidence, affidavits, or necessary documentation to support your claims
Note: anti-assignment clauses in the original structured settlement assignment papers are usually not a cause for the judge to decline your transfer.
It is, however, recommended to thoroughly review the terms of the settlement agreement along with your lawyer to rule out terms against selling your structured settlement payments.
For more on doing a structured settlement transfer in New York, California, New Jersey, or other state, give us a call, or contact us here.
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