A structured settlement was set up for payee Daijuan Matos in 2008. He turned 18 in 2018. Within two weeks of his 18th birthday, and while he was still in high school, he had not only been approached by a factoring company seeking to purchase his future payments, but had agreed to sell a portion of those payments. Under the terms of the deal he agreed to, he would sell $1,917.48 out of each payment of $2,750.00 due to be paid to him for the next 18 years, as well as future lump sums – all told, payments with an aggregate amount of $693,760.00. In exchange, the factoring company would pay him, once the transaction became effective, a purchase price of $265,898.37.
To become effective, the transaction had to receive court approval under the New York Structured Settlement Protection Act (SSPA), which authorizes a court to approve transfer of structured settlement payments if it finds – among other things – that the transfer is in the best interest of the payee.
In the case of Mr. Matos, the New York court reviewing the transaction said that such a deal was not in his best interest.
Said the court:
Matos is now 18 years of age. He is unmarried and has no children. He has not finished high school. He states that he lives with his mother . . . . In his affidavit in support of the contemplated transaction, he states that he believes that it would be beneficial to himself and his family if he were permitted to transfer and assign his right to receive the monthly payments in order to “purchase a studio apartment and pay college tuition.” However, in court he stated the funds were to purchase a house in Maryland for himself and his mother. There was no indication that Mr. Matos was on track to finish high school or that he was accepted at a college. He had not identified any studio apartment or any house which he had seen or wanted to purchase.
If the court were to approve the petition, Mr. Matos would receive monthly payments of approximately $800 instead of the $2,750.00 which was intended when his mother set up the settlement. That sum would barely pay the taxes, water, sewer and insurance on a house or an apartment and would not be a wise investment for a high school student.
* * *
His proposed use for the immediate lump sum payment is not compelling. Of concern is that the record provides only the most minimal evidence of Matos’ circumstances. Not only is there no information about the seriousness of the injuries he sustained and whether the injuries affect his ability to exercise appropriate judgment with regard to his settlement funds, there is no information about his background, employment history, ability to work, or indeed anything to assist the court in evaluating the petition’s merits. . . . Further, Matos failed to adequately demonstrate any level of understanding of the financial ramifications that an immediate transfer of the future payments, in exchange for a short-term windfall, would pose to his future. Clearly, his best interests are more appropriately served by denying his request to transfer the structured settlement payments. He should finish high school, be accepted by the college of his choice, and apply for student loans to pay for his tuition.
The opinion in this case, captioned In the Matter of the Petition of American Farms, LLC For Approval of the Transfer of Structured Settlement Payment Rights In Accordance with New York Gen. Oblig. Law §5-1701 (Matos), 510886/18, 2018 N.Y. Misc. LEXIS 4111, 2018 NY Slip Op 51349(U), Supreme Court, Kings County, N.Y. (N.Y. Sup. Ct. Sept. 24, 2018), is available here.