A factoring company may only file a transfer petition in the seller’s state of residence or domicile. If a factoring company causes a transfer petition to be filed in a state other than the state where the seller lives, then the factoring company is not complying with applicable State and Federal laws.
Edward Stone Law has been advised of many situations where a factoring company told a seller that it is legal to file a transfer petition in another state. It is not. Every state except New Hampshire has a Structured Settlement Protection Act that sets forth the requirements a factoring company must follow in filing a transfer petition. The factoring company must comply with those laws, and a Federal statute, 26 U.S.C. Section 5891. Section 5891 imposes an excise tax on a factoring transaction that does not qualify for exemption under the conditions specified in Section 5891(b).
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