Court Rejects Structured Settlement Factoring Deal Where Unemployed Payee Did Not Provide Information About Education, Skills, or Job Search

Court Rejects Structured Settlement Factoring Deal Where Unemployed Payee Did Not Provide Information About Education, Skills, or Job Search

What happens when a court is asked to approve a transfer of structured settlement payment rights, but it does not have information – about the unemployed structured settlement payee’s education, skills and job search – that it believes is necessary to determine whether the transfer is in the payee’s best interest?

The court denies the request for judicial approval of the transfer.

At least, that’s what the New York trial court did in a case earlier this month, captioned In The Matter Of The Petition Of Peachtree Settlement Funding, LLC (Salazar), No. 103075/12, 2012 N.Y. Slip Op. 32352(U) (N.Y. Sup. Ct. Sept. 10, 2012), a matter filed pursuant to the New York Structured Settlement Protection Act (SSPA), which provides that transfers of structured settlement payment rights are legally ineffective without court approval.

The court said that the relevant facts were that the unmarried, 20-year-old payee has one dependent child.  He is unemployed but looking for employment.  The proposed transfer to factoring company Peachtree Settlement Funding, L.L.C., would be of future payments with an aggregate value of $62,920.00, and in exchange for those payments Peachtree would pay him a $37,320 lump sum.  The payee proposed to use that lump sum for rent and expenses for a new apartment, to furnish the apartment, to buy clothes, and to pay for child care expenses.  “Peachtree advised Mr. Salazar in writing to seek independent professional advice regarding this transaction but he has waived such advice.”  Additionally, a factoring company had previously sought to purchase some of the payee’s payment rights, and a request for court approval of the transfer was denied in March, 2012.

The court said that it was “unable to conclude that the proposed transaction is in the payee’s best interest under the circumstances.”  In particular, the court expressed concern about the lack of information about the payee’s “education, skills, or job search” as well as the lack of independent professional advice:

The payee is unemployed and has not supplied any information about his education, skills or job search.  Despite the fact that the court lauds payee’s intentions to get his own apartment and help with child care expenses, it is not clear that this is the best way to achieve such a goal.  Payee has waived any professional advice regarding this transaction.  It is not clear that payee appreciates the amount of the discount he would be getting on this transfer.

The court also said that it was unable to conclude that the transfer terms were fair and reasonable under the circumstances.

A complete copy of the opinion is available here.

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