Wednesday, October 2, 2013

The Legal Aspect of Selling Structured Settlement Payments

Your structured settlement payments are coming in each month as scheduled for an insurance claim and you have no reason to question but that they will continue to the end of the settlement, but that is still years away. 

Meanwhile, in this upset economy, you lost your position with the company to which you have devoted ten years of your life, but these things sometimes happen to the best people through no fault of their own.  Fortunately, you have secured a new position with another company, but they are across the country.  You must sell your house and move.

Unfortunately, the sale of your house is a slow process in this economy and the prospects for a sale before you must move are not good.  You would rather sell a portion of your structured settlement to pay for the down payment of a new residence, but you are concerned about the legality of doing so.  Your settlement contract strictly forbids such a sale for lump-sum payment, even one of just a partial value of the settlement.  As far as you have been told by the insurance company’s legal counsel, the contract is non-negotiable; the language is clear.

However, you have also heard that most states allow the protection of a structured settlement sale.  This is the case in the state you are leaving and the state into which you will be moving.  Who is right?  Because most states have these laws, you may sell the structured settlement with the compliance of a number of requirements.

Legal Requirements of Structured Settlement Sales

1.    Full disclosure about the financial terms of the sale must be given to you.  This is for your full benefit of protection under the law to be fully informed about all aspects of the sale, your obligations and your rights.  Also, it is important to know that at no time during the application through funding of the sale are any of your rights waived.

2.    Written notice must be given to you advising you of your opportunity, which is encouraged, to seek independent professional advice regarding your intent to sell a portion or all of the structured settlement.

3.    A hearing in court will be held.  The judge will consider the matter before the court, including your financial condition and consequences, the justification for your request of a sale and if it is truly in your best interest to sell your structured settlement.  The judge will determine this under all the conditions set before the court and may decide in your favor regardless of the language of the original contract.  The judge has the legal power of amending the contract.

4.    The judge will issue the court order to approve the sale and implement the funding.  With that court order, the sale and funding will proceed, unless…

5.    All through the period of having an offer presented, your acceptance of the offer and even through the completion of the court’s judgment, you have a “cooling off” period after you have signed the documents of the sale to change your mind and cancel the sale.

In effect, the insurance company’s legal counsel was not entirely correct.  While it is possible that the judge would not find in your favor, if your justification is reasonable – you are not making the request to waste money in a spending spree – the judge is likely to find in your favor regardless of the tight, legal manipulation of the insurance company’s settlement contract. 

You should be able to proceed with your move, pay the down payment and secure a new residence while continuing the effort to sell your prior home.