The Structured Settlement Protection Act is a federal ruling that says individuals must get approval from the court before they are allowed to sell a structured settlement. States also have their own regulations in place on the topic of how a person can sell structured settlement payments.
Structured settlements are a contractual agreement that provide periodic payments to the plaintiff. The reason they are set up this way is to provide financial support in a way that allows an individual to plan on. The income is guaranteed to the plaintiff and is typically set up in the form of an annuity.
The Structured Settlement Protection Act was designed to protect annuitants who are still receiving their structured settlement payments and for one reason or another decide they want a larger lump sum instead. There are structured settlement companies which are companies that buy structured settlements at a discounted rate. They will pay a lump sum in exchange for the rights to some or all of the annuitants’ future payments.
There is nothing inherently wrong with this type of transaction in the secondary market, however, there have been instances in which a structured settlement company was not completely transparent with the individual who was trying to sell a structured settlement. Or they put a lot of pressure on the individual to sell the structured settlement regardless of if it was the right financial move or not.
Avoiding these types of practices is the reason for the courts getting involved. They review the details surrounding the proposed structured settlement sale to ensure that the annuitant is treated fairly. The judge’s responsibility is to try and do what is in the best interest of the individual who is trying to sell their annuity.
How can I improve my chances?
One of the main things the court will need to see to approve the sale is a legitimate reason for selling a structured settlement. Some reasons that are usually seen as valid are:
Bills are piling up
A need to pay for education
Opportunity to invest the money into real estate
Opportunity to invest the money into a business
The court will also want to make sure that you understand the financial implications of the structured settlement sale. Things like you will ultimately receive less money going through the sale process than you would over time as you took the normal periodic payments.
They will also want to be sure you are comfortable with the structured settlement company you are selling to and the details of the deal. As well as if an attorney has reviewed the deal for you.
Note the attorney the factoring company sends represents them, not the payee. Structured settlement companies must make known that the payee has the right to engage with independent legal/financial assistance concerning the annuity sale and should consider doing so before finalizing any transfer of future payments to the factoring company.
That being said a few of the many documents you’ll need are..
Settlement agreement
Annuity Agreement
The sale documents/agreement
