Unfortunately, the nature of the State Structured Settlement Payment Transfer Statutes requires court approval of any “transfer” of one’s structured settlement payment rights. What that means is that the payee/annuitant, who owns this valuable intangible property right, must secure approval of a Judge in order to liquidate future structured settlement payments. Because “transfer” is a broad term, which includes any sale, assignment or pledge/security interest for consideration (meaning that anyone who wanted to use their future structured settlement payments as collateral for a loan from their bank or credit union would also need to secure court approval of such transaction), that in most circumstances where a payee/annuitant was seeking any sort of liquidity relative to their future structured settlement/annuity payments, via a secured loan or a sale/assignment, they are going to have to go to court and secure approval of the transaction from a Judge.
Many payees/annuitants are surprised to learn that they must secure court approval in order to liquidate their future payment rights. So, these transfer laws, which were meant to protect payees/annuitants from being taken advantage of and insure that they were making informed, considered decisions regarding their financial assets do, in fact, restrict the payees/annuitants’ rights to manage their financial affairs and dispose of their assets in the manner that they (the payees/annuitants) feel is best for them.
So, the first thing payees/annuitants need to understand when they start off on this process is that, ultimately, they will not have control over this decision. The Judge will. Many Judges will often defer to the wishes and desires of the payees/annuitants, even if the Judge does not think the transaction is a great deal. A few, unfortunately, take the position that these transactions should rarely, if ever, be approved. Unfortunately, Judges do not all apply the law the same way and Judges do not all subscribe to the theory that competent, adult payees should be permitted, in most cases, to manage their own financial affairs how they seem fit and make their own decisions about their financial assets. So, payees/annuitants should be prepared to have to persuade a Judge that they (the payee/annuitant) fully and completely understands the transaction, desire to complete it, and that the transaction is in their best interest. Being confident and adamant, but respectful of the Court, is important for payees.
Different courts will be able to hear these matters on different schedules. In some jurisdictions, the case will be heard quickly, within 30 days after the court case is filed. In other jurisdictions, it may take longer (60-90) days and in a few jurisdictions, even longer than that.
Once the payee/annuitant reaches an agreement with the funding company (buyer), the funding company will send you a disclosure statement that sets for the primary financial terms of the transaction – i.e. schedule and total of future payments being transferred/assigned; detail of any expenses that will be assessed the payee; the purchase price that the payee/annuitant will receive, etc. Then, depending on the applicable State law, the payee will have 3, 10, or perhaps 14 days to think about it (a “waiting period”) before they can legally sign a contract. A payee/annuitant should be very suspicious of a company or sales person who suggests that they “back-date” documents. Strict compliance with the statutory waiting period is required.
Once the transaction documents are executed, the funding company will retain counsel in your State who will file a transfer proceeding in court and secure a hearing date. You will likely be contacted by counsel prior to the hearing. The payee/annuitant certainly has the option of retaining their own counsel or consulting with a financial advisor, but that is not required in most States. (Some States do require the payee/annuitant to be represented or receive advice from a financial advisor or lawyer.) I would recommend that the payee/annuitant request from the funding company early in the process a copy of the transfer statute in that state and review it carefully. The lawyer for the funding company is NOT the lawyer for the payee/annuitant. Their objective is the same, to secure court approval of the transaction, but they are not representing, advising, or acting on behalf of the payee/annuitant.
Some Judges are predisposed to be hostile to these transactions. There are some reasons for that, which are too complicated and involved to discuss here, but the payee should understand that they are important in the process of securing court approval of the transaction. The payee should understand that what they are doing is perfectly legal and permissible by the law. They should not be embarrassed about the transaction or having to go to court. Payees should be very clear and understand the transaction documents so that if the Judge asks, they can intelligently describe to the Judge the payments that they are transferring/assigning and the amount that they are receiving in return. Payees should demonstrate complete confidence that they want to proceed with the transaction and that they understand the transaction and the fact that they are receiving less money today than if they wait until the payments come due in the future, but that they desire to complete the transaction and they have thought it through, considered other alternatives (i.e. borrowing money), and that they want the court to approve the transaction. Be confident and certain.