Getting Court Approval

A Guide to everything you should know about selling.

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Chapter 5

Getting court approval when you sell structured settlement payments

For many people who want to sell structured settlement payments the idea of getting court approval is either distasteful or stressful. But don’t worry; it is a relatively easy process and most of it will be handled by the company that buys your payments. Let’s break down how to sell structured settlement payments and a few things about court approval for you.

The Law

Federal law requires that every time you sell structured settlement payments include court approval. If you fail to get this approval for your structured settlement buyout the buyer could be subject to a 40% tax penalty on their profits. So, it is important for them to do things right. If you try to sell your payments to a company that says that no approval is necessary then you should find another company.

Appearing in Court

Now, getting court approval and actually appearing in court yourself are not the same thing. While every state requires court approval of the sale, not all require you to actually appear in court. As we mentioned previously, you do not have to appear in court when you sell structured settlements in Florida, Illinois, and Virginia. In every other state you will have to show up for court, and likely answer a few questions that the judge poses to you.

Do not be afraid.

These are usually simple questions that you can answer honestly. It is good to know that your factoring company probably knows these rules pretty well. In our research we asked six companies whether we had to go to court and each one answered accurately for our state.

Reasons that Judges Deny

The most common reason for a judge to deny when someone wants to sell structured settlement payments is because the cost of the sale – that is, the “fee” that the factoring company is taking – is too high. We will discuss this more in section 37 of this guide. Judges can also deny because they don’t feel that you have a good reason to sell, or they think the sale is simply not in your best interests. They can also deny a sale that is for a minor or elderly person, feeling that it is not in their best interests.

Sales can also be denied if there is another party who has a claim to the money. This is most often done if your spouse is not part of the sale and may have a claim. Or, if you owe money for past due child support, taxes or to some other government agency.

It is also important to know that if your structured settlement is owned by the government, most likely because you earned it suing the U.S. federal government in some way, you probably cannot sell it, no matter what state law, state courts or the insurance company say. A search of court cases shows a strong history of the U.S. government denying people who want to sell settlements with the government; even the appeals have failed time and again. Apparently, the federal government is above the jurisdiction of the state courts.

Know the law!

Know, up front, whether or not you will have to appear in court. Some states require that paperwork be filed but do not require the seller to actually appear in court; other states do require that you appear. Do your research and ask the representative of the company that is buying your settlement so that you know, up front, what to expect.

What if You are Denied?

Sometimes, what seems like the best structured settlement buyout gets denied. Sometimes there is a good reason, but other times the reason is not valid, or it involves only the cost of the sale. In these cases you can go back to court again, often with a different company offering a better sale rate, and get approval.

You will not necessarily see the same judge when you sell structured settlement payments, but the new judge will know that you were denied previously and will consider that. If you are denied again you can, theoretically, appeal to a higher court, but this is rare. In fact, we know of no such case where this has happened, but it could… in theory. Your best bet is to go to court prepared, with a good reason, and hope that the sale is approved. Even if you were denied in the past, call Strategic Capital and we will work with you to get your sale approved!

If you want to know how to sell structured settlement payments the answer is clear – Call Strategic Capital today.