by John Darer CLU ChFC MSSC CeFT RSP CLTC
Did you know that buried in the details of a Miscellaneous section of a Structured Settlement Transfer Agreement may be written notice to sellers that a Servicing Arrangement may be required by the Annuity Issuer? Pay attention!
"In the event, the Assigned Payments are only a portion of the full amount of the individual payment due to You, the Annuity Issuer making the payment may require that We [i.e. the factoring company buying your payment(s)] receive the full amount of each payment and require that We (i.e. the factoring company) assume the obligation to remit any amount above and beyond the Assigned Payments (i.e the unassigned portion of the structured settlement payments) to You ("the Servicing Arrangement"). You agree to this Servicing Arrangement and further understand that this Servicing Arrangement may encumber the future assignment of the unassigned portion of the settlement payment"
What Does Encumber Mean?
An encumbrance is a claim against an asset by an entity that is not the owner. Common types of encumbrances against real property, liens, mortgages, or restrictive covenants . Encumbrances impact the transferability and/or use of subjected properties.
The calamitous handling and rapid demise of SuttonPark, once the United States' largest payment servicer of structured settlement receivables wreaked havoc on the lives of payees and investors alike for months. A multi-faceted business school case study for many years to come.
But it's more than that. Consider the fine print in your states Structured Settlement Protection Act. Here is what the Rhode island Structured Settelment Protection Act says about the Effects of Transfer of Structured Settelment Payment Rights
Chapter 9.3
Rhode Island Structured Settlement Protection Act
R.I. Gen. Laws § 27-9.3-5
§ 27-9.3-5. Effects of transfer of structured settlement payment rights.
Following a transfer of structured settlement payment rights under this chapter:
(1) The structured settlement obligor and the annuity issuer shall, as to all parties except the transferee, be discharged and released from any and all liability for the transferred payments;
(2) The transferee shall be liable to the structured settlement obligor and the annuity issuer:
(i) If the transfer contravenes the terms of the structured settlement, for any taxes incurred by the parties as a consequence of the transfer; and
(ii) For any other liabilities or costs, including reasonable costs and attorneys’ fees, arising from compliance by the parties with the order of the superior court or arising as a consequence of the transferee’s failure to comply with this chapter;
(3) Neither the annuity issuer nor the structured settlement obligor may be required to divide any periodic payment between the payee and any transferee or assignee or between two (2) (or more) transferees or assignees; and
(4) Any further transfer of structured settlement payment rights by the payee may be made only after compliance with all of the requirements of this chapter.
Key Takeaway When Someone is Selling Part of Their Structured Settlement Payment Streams?
Think before you act and always seek Independent Professional Advice
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