The Structured Settlement Protection Act of 2002 was instituted to protect those who had been awarded structured settlement money and had a desire to sell part or all of it for a lump sum. Basically, it demands that any transactions conducted by a factoring or structured settlement loan company must be approved by a state court to make sure the transaction is in the best interest of the client and the client’s dependents.

Also, because of this law, the insurance company that issued the structured settlement is made part of the process. In the past, the insurance company often didn’t find out a structured settlement payment had changed hands until after the fact. Not less than twenty days before the scheduled hearing, all information about the sale needs to be served on all interested parties. Professional counsel is required for the client to ascertain the effect on their financial future of receiving a lump sum payment.

Under the Structured Settlement Protection Act a judge must approve the sale of a structured settlement. In order to do this the client must have been given full disclosure about the financial terms of the sale. This disclosure should be given not less than 3 days before the contract signing date and the information should be in bold type, not small print.

Compliance with the disclosure of information is solely the responsibility of the company who wants to buy the settlement. Neither the client nor the issuer is responsible for this. If there is any liability for non-compliance, that liability also is the responsibility of the purchasing company.

The client must have a period of waiting after signing the documents to give them a chance to change their mind. Too often, when people get large lump sums they squander it within a short period of time and have nothing left for their future. The Structured Settlement Protection Act is there to, as far as possible, make sure this doesn’t happen.

The client must also be advised in writing by the structured settlement purchaser to get independent professional advice about the sale. In some states this advice can be waived. After this, a hearing will be held and the case is presented to a judge. The judge will examine the client’s financial situation and the reason they have for wanting the sale and decide if the sale is in the client’s best interest.

Before the Structured Settlement Protection Act came into effect, unscrupulous financial experts took advantage of an unsuspecting person who had a structured settlement and needed financial liquidity. The terms of transfer of the settlement were not fully disclosed to the client and more often than not the terms favored the buyer.

Without full knowledge of the transfer process and professional help, the client could face a higher tax bracket because of the lump sum payment. This could take most of the money gained and defeat the purpose of getting the cash. When looking for a buyer for a structured settlement, the recipient should seek unbiased guidance as well as look carefully into the history, experience and testimonials of any company that buys structured settlements.