Legal Requirements and Court Approval Flashcards
6 cards from real Sell Structured Settlement practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 Legal Requirements and Court Approval flashcards as text
What is a 'qualified assignment' in the context of structured settlements?
Answer: A tax-free mechanism where the defendant assigns the payment obligation to a third-party assignee company
A qualified assignment under IRC Section 130 allows the defendant to transfer the periodic payment obligation to a third-party assignee (typically an insurance subsidiary) on a tax-free basis.
After a court issues an order approving a structured settlement transfer, what is typically the next procedural step?
Answer: The order is served on the annuity issuer and obligor, who then redirect payments
Once the court order is entered, certified copies are sent to the annuity issuer and obligor directing them to redirect the sold payments to the factoring company.
Which of the following would most likely cause a judge to deny a structured settlement transfer petition?
Answer: The payee has no stated reason for needing the funds and the discount rate is 20% or higher
An extremely high discount rate combined with no compelling reason for the funds signals an exploitative transaction that does not meet the best interest standard.
What role does the payee's attorney typically play in a structured settlement transfer proceeding?
Answer: The payee's attorney independently advises the payee about the transaction's terms and implications
An independent attorney for the payee reviews the transfer terms, explains the consequences, and advises the payee on whether the deal is in their best interest — separate from the factoring company's legal team.
Which US state was among the first to enact a Structured Settlement Protection Act?
Answer: Texas
Texas enacted one of the early SSPAs in the late 1990s, and its model influenced many other states' structured settlement transfer laws.
What must a factoring company provide to the payee at least 3 business days before the payee signs the purchase agreement under most SSPAs?
Answer: A written disclosure statement showing the discount rate, fees, net payment, and total payment value being sold
SSPAs mandate that factoring companies deliver a written disclosure — often called the required disclosure statement — at least 3 business days before the payee executes the transfer agreement.