When selling a structured settlement, one of the most critical steps is court approval. Unlike other financial transactions, you can’t simply sign an agreement with a factoring company and walk away with your lump sum. The law requires a judge to review and approve every sale, ensuring it’s in your best financial interest.
This 2025 guide will explain how court approval works, what documents you need, what the judge looks for, and how to prepare for a smooth approval process.
1. Why Court Approval Is Required
Structured settlements are designed to provide long-term financial stability. To prevent exploitation by factoring companies, every U.S. state has passed a Structured Settlement Protection Act (SSPA).
👉 This means:
- You cannot sell payments without court approval.
- Judges must ensure the sale is fair, reasonable, and in your best interest.
- If the sale would cause financial hardship or take advantage of you, the judge can reject it.
2. The Court Approval Process – Step by Step
Step 1: Filing a Petition
The factoring company (buyer of your settlement) files a petition with the local court. This petition explains:
- The details of your structured settlement.
- The payments you want to sell.
- The lump sum you’ll receive.
- Why you want to sell.
Step 2: Scheduling a Hearing
The court schedules a hearing date. You will be notified and must appear in person.
Step 3: Judge’s Review
The judge will:
- Ask questions about your financial situation.
- Review the terms of the sale.
- Ensure you fully understand the consequences.
Step 4: Approval or Rejection
- Approval: If the judge decides it’s in your best interest, the sale is approved, and you’ll receive your lump sum.
- Rejection: If the judge finds the sale unfair, it will be denied.
3. Documents You’ll Need
To improve your chances of approval, prepare these documents:
- Original structured settlement agreement.
- Identification (driver’s license, passport).
- Recent bank statements.
- Financial need explanation (medical bills, debt, home purchase, etc.).
- Written disclosure statement from the factoring company (required by law).
4. What Judges Consider Before Approval
Judges evaluate several key factors:
- Discount rate: Is the lump sum a fair deal, or is the company taking advantage?
- Financial need: Do you truly need the money now, or are you selling impulsively?
- Impact on your future: Will selling leave you financially vulnerable?
- Legal compliance: Did the factoring company provide all necessary disclosures?
5. Common Reasons Judges Deny Sales
- The lump sum offer is too low (very high discount rate).
- The seller does not fully understand the agreement.
- The seller is not facing a genuine financial need.
- Missing or incomplete documents.
6. Example of a Court Hearing
Imagine Sarah, who has $200,000 in future structured settlement payments. She wants to sell $100,000 worth of payments for $60,000 today.
- In court, the judge asks why she needs the money.
- Sarah shows hospital bills and medical debt.
- The judge sees her reasoning is genuine and the discount rate is reasonable.
- ✅ The sale is approved.
Now imagine if Sarah wanted to sell all her payments for only $50,000. The judge may reject it because it’s unfair and not in her best interest.
7. How Long Does Court Approval Take?
- Typically 30–60 days from filing to approval.
- Delays can happen if documents are missing.
- Working with an experienced company can speed things up.
8. Tips for a Smooth Approval
- Choose a reputable structured settlement buyer.
- Gather documents early.
- Be prepared to explain your financial need.
- Consult a lawyer to guide you through the process.
Court approval is not just a formality—it’s a safeguard that ensures you’re not exploited when selling your structured settlement. By preparing properly, gathering documents, and working with trustworthy professionals, you can make the approval process smooth and stress-free.
In 2025, judges continue to prioritize fairness and protection for individuals selling settlements. With the right approach, you can confidently navigate the legal process and access your lump sum safely.
