The sale of a structured settlement to a factoring company will involve a court proceeding. It may also involve an independent professional advisor or a guardian ad litem. In this report, attorney Matt Bracy explains the differences between the two.
The independent professional advisor is envisioned by the Structured Settlement Protection Act. A guardian ad litem, on the other hand, is a court-appointed officer, probably a lawyer. Bracy says that courts are authorized to appoint guardians ad litem whenever they feel one is needed, typically for minors or for people who are incapacitated and not competent to act in their own behalf. GALs “are officers of the court, and they report directly to the court.”
Independent professional advisors, on the other hand, are lawyers or actuaries who provide advice to the seller of a structured settlement. The Settlement Protection Act requires factoring companies to advise prospective sellers to seek advice. As Bracy points out, in the majority of states, the seller of a structured settlement can seek that advice or can waive the right to receive such advice. In either case, a written document must be submitted to the court so that the seller’s choice is clearly documented.
Bracy says that the right to waive receiving the advice is important. Some states require a seller to have the independent advisor. It matters, Bracy feels, because the advice is not free; a structured settlement seller will have to pay the advisor. Whether the payment is made in advance of the hearing or at the time the settlement is sold, there must be a payment by the seller. Requiring the services of an advisor seems to contravene our system of allowing people to make their own choices in litigation.
Bracy adds that, in a lot of cases, it is important for a prospective seller to seek advice. “It’s very important for people to be . . . aware of what their legal rights are.” But, he says, he would never force someone to make that decision. Bracy suggests that a lot of structured settlement sellers know exactly what they are doing and shouldn’t be forced to pay for advice they don’t need.
The independent professional advisor—a lawyer, for example—will have an attorney-client relationship with the seller. The advice given will be privileged. That means that no one would be able to ask about the substance of the conversations between the seller and the advisor. All a seller has to do to satisfy the statute is to affirm that advice was sought and received. Nothing further needs to be disclosed.
On the other hand, a guardian ad litem is an officer of the court, acting on behalf of the judge. That means that the judge who appoints a guardian ad litem will be able to ask the guardian in open court to discuss all conversations with the seller. This is a very big difference from the usual situation.
Matt Bracy is a partner in Scheef & Stone, L.L.P., Dallas, Texas, representing businesses and business owners in the areas of general business law, contract negotiations and drafting, business formation, transactions, collections, commercial litigation and government relations. Over his career he has represented diverse businesses and individuals in private practice, and in-house as General Counsel and Director of Government Relations for multi-million dollar companies. The Factoring Channel is a featured network of the Sequence Media Group.