The following papers numbered 1 to _6_ read on this motion, _______________________

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Notice of Motion-Order to Show Cause - Exhibits and Affidavits Annexed—————————_______________ _____

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Replying Affidavit and Exhibits———————————
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Pleadings — Exhibit——————————— 1;————————————&# 151;———————————— —————____________________Stipulation — Referee's Report —Minutes——————————
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Upon the foregoing papers and due deliberation thereof, the Decision/Order on this motion is as follows:

Petitioners' application to approve a transfer of structured settlement payments from Respondents to SPECIAL ASSET PLACEMENT ADVISORS, LLC ("Special Asset"), is granted to the extent provided below.

The Petition

Special Asset states that it is seeking approval of the transfer of certain structured settlement payment rights due under a structured settlement payment agreement in accordance with 26 U.S.C. § 5891 et seq. and GOL § 5-1701 et seq., namely the monthly payments of three thousand and seventy dollars commencing October 19, 2008 through and including September 19, 2028, totaling $626,280.00. ("Assigned Payments"). (Ver. Pet. at Ex. C.) Special Asset has offered J.Q., after subtracting commissions, fees, costs, expenses and charges, $235,701.00 in exchange for transferring these Payments. (See id. at Ex. C.) New York Life Insurance Company's Funding Agreement indicates that J.Q. was to receive $3,070 a month from October 19, 2008 until September 19, 2028. Consequently, this Petition seeks the assignment of all of J.Q.s remaining payments. (Ver Pet at Ex. A.)

The Hearing

Petitioners by its attorneys, J.Q. and his criminal defense attorney, who also agreed to represent him in these proceedings, appeared before the Court on August 8, 2011, and offered statements on the record in support of this Petition.

J.Q. is 20 years old and currently being held at Riker's Island detention facility, having been accused of committing an A2 felony. (J.Q. Aff at ¶ 2;Hrg Tr at 17:10-12.) He is seeking to sell his settlement payments to post his $100,000 bail; to put $50,000 in estimated legal fees towards his defense; and to provide for his living expenses while awaiting trial. (J.Q. Aff at ¶¶ 2 & 6.) [*3]He has been in jail since May 7, 2011, when he was indicted on the aforementioned charges. (Hrg Tr at 10:24.)

Prior to his arrest, he was renting a basement apartment for $500, when he claims he was forced to move due to gang members and his landlord cheating him. (Id. at 10:3-7.) Then he moved in with his sister, but had to leave there because of her alleged drug use. (Id. at 8:16-20.) He then moved in with his father who kicked him out and forbade him from returning when he was arrested on the present charges. (Id. at 8:4-10.) He has no high school diploma, no employment history and has admitted to past issues with illegal drug abuse. (Id. at 6:11-14; 10:7-11.) He receives $3,070 a month in structured settlement payments and claims that his "godbrother" has been collecting these payments for him and placing them in an account since he has been incarcerated. (Id. at 11:13-16.)

When asked how he spent his $3,070 monthly payments prior to his arrest, J.Q. explained that: his family was "ripp[ing] [him] off" (id. at 11:1-3); his sister "abus[ed]" his money to "feed her habit" (id. at 10:11-13); he was giving money to his father who was out on parole (id. at 10:17-18); and he was "basically wasting, like a thousand, eight hundred a month" (id. at 10:18-19).

According to his attorney, who also spoke on the record during the hearing, J.Q. is facing a minimum sentence after trial of ten years to life. (Id. at 17:10-15.) He also stated that the case involves DNA evidence, witness/victim statements, two witness line-up identifications, two separate locations and video surveillance. (Id. 18-19.) Therefore, J.Q. may need to retain experts in DNA evidence and/or witness identification, in addition to covering his attorney's $24,000 fee. (Id. at 18:8-9.)

The Prior Petition

J.Q. sought to sell portions of his structured payments to the current Petitioners in June 2011. He sought to sell $312,000 worth of payments—which represented $1,500 of his $3,070 monthly payments from June 19, 2011 until September 19, 2028—for $123,768. This Petition was discontinued, however, when J.Q.'s current incarceration occurred.

General Obligations Law

The standard for approval of the above transaction is contained in GOL §5-1706, which states:

No direct or indirect transfer of structured settlement payment rights shall be effective and no structured settlement obligor or annuity issuer shall be required to make any payment directly or indirectly to any transferee of structured settlement payment rights unless the transfer has been authorized in advance in a final order of a court of competent jurisdiction based upon express findings by such court that: . . .

the transfer is in the best interest of the payee, taking into account the welfare and support of the payee's dependants; and whether the transaction, including the discount rate used to determine the [*4]gross advance amount and the fees and expenses used to determine the net advance amount, are fair and reasonable. Provided the court makes the findings as outlined in this subdivision, there is no requirement for the court to find that an applicant is suffering from a hardship to approve the transfer of structured settlement payments under this subdivision;

GOL § 5-1706(b).

"It is assumed, therefore, that the payee's decision, even if freely entered into, is not always one a reasonable person might make, and the court is in effect asked to protect an individual from himself or herself." 321 Henderson Receivables Ltd. P'ship v. DeMallie, 2 Misc 3d 463, **2-3. As such, the court is required to conduct two distinct inquiries before a transfer of a structured settlement can be approved. The fairness and reasonableness of the transaction is to be weighed from the perspective of the overall market in loans, taking into account prevailing interest rates and the possibilities of alternative financing. The best interest standard, in contrast, considers the financial condition and needs of the specific payee who is proposing to sell his or her income stream.

This Court agrees, however, with the increasingly ubiquitous maxim "that all of these transactions are economically unwise, [thus], it would make no sense for any court to undertake a subjective analysis whether these transactions strike a particular judge as fair and reasonable' according to his or her own economic predisposition." Matter of 321 Henderson Receivables L.P., 819 N.Y.S.2d 826, 832. Ergo, regardless of whether the proposed transfer rate is within the range of the marketplace, "[t]he fair and reasonable test should . . . also [be] weighed against whether the transaction is in the best interest of the payee." Id. at 832-33.

The best interest standard under New York's Structured Settlement Protection Act requires a case-by-case analysis to determine whether the proposed transfer of structured settlement payments, which were designed to preserve the injured person's long-term financial security, will provide needed financial rescue without jeopardizing or irreparably impairing the financial security afforded to the payee and dependents by the periodic payments. The best interest prong should give specific consideration to such factors as the payee's age; mental and physical capacity; maturity level; ability to show sufficient income that is independent of the payments sought for transfer; capacity to provide for the welfare and support of the payee's dependants; the need for medical treatment; the stated purpose for the transfer; and the demonstrated ability to appreciate the financial terms and consequences of the proposed transfer based upon truly independent legal and financial advice. Hardship is only one factor to be considered, based upon well-documented evidence that the payee or a payee's dependent is confronted with such economic hardship, desperate or dire straits or unanticipated family emergency that, in the absence of the proposed transfer, the payee would be subject to dire consequences, such as imminent loss of life, loss of a home or the financial collapse of the family.

In re Settlement Capital Corp., 1 Misc 3d 446, 455. [*5]

The statute was enacted because "factoring companies were using aggressive advertising, plus the allure of quick and easy cash, to induce settlement to cash out future payments, often at substantial discounts, depriving victims and their families of the long-term financial security their structured settlements were designed to provide." Matter of Settlement Funding of New York, LLC (Rahman), 31 Misc 3d 1229A (citations omitted). This paternalistic purpose is designed to prevent individuals from doing anything "foolish" with their money thereby leaving them without resources for the future. Matter of 321 Henderson Receivables Origination LLC v. Lugo, et al., 23 Misc 3d 1138A; Matter of Vandas Sanskrit, LLC, 2011 NY Slip Op 32041U, *5.

Analysis

J.Q. is prepared to liquidate all of his structured settlement payments to pay $100,000 for his bail, $50,000 for his legal defense and $85,701 for his living expenses. Although it is in J.Q. best interest for him to post bail and fund his defense, the Court finds that it is not in his best interest to allow him to liquidate all of his payments. J.Q. lacks a high school education. There is no evidence that he has ever held a job or tried to obtain one. He is also under the impression that his employment prospects are "quite dim" since he is an indicted felon. (J.Q. Aff at ¶ 6.). He indicated that he has a history of being taken advantage of by family members and others. He has spent $92,100 of his payments over the last 2 and ½ years with nothing tangible to show for it. At this rate, the $85,701 he is seeking would be gone in the same amount of time. The difference is, he will be left with nothing.

In a best-case scenario, J.Q. will be acquitted of the charges against him. Yet this may not occur for up to another year given the time between arrest and trial, and the complexity of his criminal case. This would leave him with a year's worth of expenses paid before he would have to find a way to support himself without any future payments to look forward to for relief. Given J.Q.'s history, environment, apparent lack of fiscal responsibility—coupled with the precarious state of the job market—the Court is suspect of his desire and ability to save and budget his money so that it will last him until he is able to support himself without it. See Matter of 321 Henderson Receivables, L.P. v. Martinez, 11 Misc 3d 892, 896 (stating that one of the reason Petitions are denied is because "the payee oftentimes lacks a viable, concrete plan for the use of the funds, or a more viable alternative exists which better serves his interests").

Worst-case scenario, J.Q. is convicted at trial and sentenced to 10 to 15 years. If he were to achieve parole at the end of his minimum sentence, he would be in his mid-to-early thirties upon his release. This would also occur around the time his settlement payments would cease under the Agreement with New York Life Insurance. He would be a former felon in need of capital. Any remainders to his payments will be sorely needed.

Regardless, J.Q. has been detained since May 7, 2011. Therefore—according to his [*6]testimony—he should have at least $12,000, his payments for May 19th, June 19th, July 19th and August 19th, safely nestled in an account waiting for him at this moment. The Court finds that this sum, supplemented by some portion of his monthly payments should be sufficient to find an apartment, furnish it and provide for J.Q.'s living expenses until trial. If he has succumbed to another needy acquaintance, however, all the more reason for this Court to ensure that as much of his future payments are preserved as possible.

Furthermore, J.Q. was willing to sell $312,000 of his total payments for $123,768, leaving him $1,500 a month in payments, according to the prior Petition. Consequently, the Court finds that J.Q. has viable options for his situation. 1) Reduce the amount of payments he is selling and maintain some portion of the monthly payments. 2) Sell some of the later payments so that he can provide for his present living expenses until his fate is decided. 3) Sell some of his earlier payments to provide for his uncertain future.

Conclusion

Based on the above, this Court will approve a transaction that will provide for J.Q.'s bail and his legal expenses, $150,000, only. Thus, the Court is granting renewal of the Petition upon papers that conform to this Decision.

The foregoing shall constitute the decision and order of this Court.

Dated: _________________J.S.C.