What Is the NY Structured Settlement Protection Act?
The New York Structured Settlement Protection Act (General Obligations Law §5-1701 et seq.) was enacted to protect structured settlement recipients from predatory "factoring" companies that purchase future payment rights at steep discounts.
Before any transfer of structured settlement payment rights can take effect in New York, a court must review the proposed transaction and find that it is in the best interest of the payee — taking into account the welfare and support of the payee's dependents.
This is one of the strongest structured settlement protection statutes in the country. It applies to all transfers of structured settlement payment rights by New York residents, regardless of where the annuity was issued.
Key Statutory Requirements
- The payee must be represented by independent professional advice (an attorney or other advisor) — or must have waived that right in writing after being advised of its availability.
- The transfer must be in the best interest of the payee, taking into account the welfare and support of the payee's dependents.
- The transferee (factoring company) must provide required disclosures at least 10 days before the payee signs the transfer agreement.
- The transfer agreement must clearly state the amounts and due dates of the payments to be transferred, the aggregate amount, the discounted present value, and the discount rate used.
- A New York court must review and approve the transfer before it becomes effective.
- The annuity issuer and any assignee under IRC §130 must be notified of the proposed transfer.
How the Court Approval Process Works
New York's approval process is designed to be a genuine safeguard — not a rubber stamp. Here's what happens from start to finish.
01
Transfer Agreement
The factoring company prepares a transfer agreement with required disclosures — including the discount rate, present value, and amounts being transferred. You must receive this at least 10 days before signing.
02
Independent Advice
You are entitled to independent professional advice from an attorney or financial advisor before signing. The factoring company must advise you of this right in writing.
03
Court Petition Filed
The factoring company files a petition in New York Supreme Court. The annuity issuer and any IRC §130 assignee must be notified and given an opportunity to respond.
04
Best Interest Review
A judge reviews the transaction and must find it is in your best interest — considering your financial situation, the purpose of the transfer, and the welfare of your dependents.
05
Court Order
If approved, the court issues an order authorizing the transfer. Only then does the factoring company's purchase become legally effective and binding on the annuity issuer.
Warning Signs of a Predatory Factoring Company
Not all factoring companies operate ethically. Before you sign anything, watch for these red flags:
- High-pressure sales tactics or urgency to sign quickly
- Discount rates that are not clearly disclosed upfront
- Promises that court approval is "just a formality"
- Offers that seem too good to be true
- Requests to sign documents before consulting an attorney
- Companies that discourage you from seeking independent advice
Think Carefully Before You Sell
Your structured settlement was designed to provide long-term financial security — often to cover ongoing medical expenses, living costs, or support for dependents. Selling payments for a lump sum almost always means receiving significantly less than their true value.
Factoring companies typically apply discount rates of 10–20% or more, meaning a stream of payments worth $200,000 might yield only $100,000–$140,000 in cash — or less.
Before proceeding, consider speaking with an independent professional advisor (IPA) — an attorney or financial advisor — who has no financial interest in whether you sell.
Talk to John Darer — 646-849-1588Frequently Asked Questions
Common questions from structured settlement recipients considering a transfer of payment rights.
Can I sell all of my structured settlement payments?
You can apply to transfer some or all of your future payments, but a New York court must approve the transfer and find it is in your best interest. Courts scrutinize full transfers carefully, particularly where the payee has dependents or ongoing medical needs.
How long does the court approval process take in New York?
Typically 45–90 days from the time the factoring company files the petition. New York's process is more rigorous than many other states, which is a feature — not a bug — designed to protect recipients.
What is a "discount rate" and why does it matter?
The discount rate is the interest rate the factoring company uses to calculate how much to pay you today for future payments. Higher discount rates mean you receive less money. Rates of 10–20% or more are common in the factoring industry — meaning you may receive far less than the true value of your payments.
Can the annuity issuer block the transfer?
The annuity issuer must be notified but generally cannot block a court-approved transfer. However, the issuer may raise concerns with the court, and some annuity contracts contain anti-assignment provisions that can complicate the process.
What if I need cash but don't want to sell my payments?
There may be alternatives worth exploring before selling — including loans, government assistance programs, or restructuring other financial obligations. John Darer can help you think through your options as part of a broader settlement planning conversation.
Have Questions About Your Structured Settlement?
John Darer provides independent, objective guidance to structured settlement recipients throughout New York — with no financial interest in whether you sell your payments.