Sell Structured Settlement Consumer Protections and Rights 3

Question 1

What is the most common reason courts deny structured settlement transfer petitions?

Accepted Answer

The transfer is not in the best interest of the payee

Answer

The factoring company failed to register with the state insurance department

Answer

The discount rate applied exceeds a set state maximum

Answer

The original settlement was for less than $50,000

Question 2

Which of the following is generally NOT required to be disclosed to a seller under state SSPAs?

Accepted Answer

The factoring company's internal profit margin on the transaction

Answer

The gross advance amount being offered to the seller

Answer

The effective annual discount rate applied to the payments

Answer

All fees and expenses to be charged to the seller

Question 3

A payee in a state with an SSPA completes a structured settlement transfer without obtaining court approval. What is the most likely legal outcome?

Accepted Answer

The transfer may be void or voidable and the factoring company faces the 40% excise tax under IRC Section 5891

Answer

The transfer is valid but the factoring company pays a small administrative fine

Answer

The payee must return the advance payment plus interest to the factoring company

Answer

The transfer is retroactively approved after a hearing is held

Question 4

What is a 'qualified order' as defined under IRC Section 5891?

Accepted Answer

A final court order or judgment approving the transfer of structured settlement payment rights that meets federal requirements

Answer

An approval order issued by a qualified financial institution that funds the purchase

Answer

A rating issued by a qualified settlement fund administrator

Answer

An IRS determination letter confirming the tax treatment of the transfer

Question 5

How must the transfer agreement be written under most SSPAs to protect the seller?

Accepted Answer

In plain language that clearly explains all terms and the seller's rights

Answer

In technical legal language to ensure maximum enforceability in court

Answer

Only in the standard form language preferred by the factoring company

Answer

In a federally standardized format approved by the Consumer Financial Protection Bureau

Question 6

Which parties typically have standing to object to a structured settlement transfer petition filed with the court?

Accepted Answer

Any interested party, including the seller's dependents and government benefit providers

Answer

Only the seller and the factoring company as the direct parties to the deal

Answer

Only the annuity issuer and the original defendant who funded the settlement

Answer

Only parties who were directly involved in the original underlying litigation

Question 7

What is the practical significance of the 'best interest' standard applied by courts in structured settlement transfer proceedings?

Accepted Answer

It requires courts to weigh the seller's financial need against the value they are giving up and the impact on dependents

Answer

It ensures the factoring company offers the highest possible cash advance to the seller

Answer

It mandates that sellers receive at least 70% of the actuarial present value of their payments

Answer

It applies only when the seller has minor children or other legal dependents