Do You Need Pre-Settlement Lawsuit Funding? FAQ

Despite the fact that lawsuit funding has been around for several years, many people are confused about this legal service. You may wonder what is lawsuit funding and how can a plaintiff use this valuable service? The following is a list of lawsuit funding FAQs.

1. What is lawsuit funding?

A pre-settlement cash advance to help a plaintiff financially with emergency and every day expenses during the litigation process.

2. Who is eligible for lawsuit funding?

A plaintiff who is involved in a lawsuit (usually over an injury or disability of some type), has retained an attorney, has a viable lawsuit, and who is having financial problems relating to the injury or disability.

3. What types of cases qualify for lawsuit funding?

All types of personal injury cases, including, but not necessarily limited to auto accidents, medical malpractice, workers compensation (limited), slip & fall/premises liability, wrongful death, construction accidents, product liability, asbestos mesothelioma, FELA/train accidents, Maritime/Jones Act, dog bites, airplane crashes, spinal cord injuries, traumatic brain injuries, nursing home neglect, and fires & explosions. The plaintiff must be represented by an attorney.

4. What are the primary benefits of lawsuit funding?

Personal injuries often result in short or long term disability. Litigation over these injuries and/or disability can take months, even years, to resolve. Injured or disabled people are at a substantial economic disadvantage against well-financed, multi-million dollar, insurance companies. These insurance companies utilize delay, deny and defend strategies to cause financial hardship to the injured or disabled plaintiff, trying to force them to settle valuable cases for pennies on the dollar. The plaintiff will often become so desperate that any offer will settle the case. That is the insurance company strategy. A strategically timed lawsuit cash advance helps meet financial obligations while providing the attorney with time needed to obtain full value for the case. It can cover basic living expenses, mortgage payments, auto payments, medical expenses, and other important bills.

5. Does the plaintiff need to be employed and have good credit?

Lawsuit funding is not dependent on good credit or employment history. Employment or lack of employment is not a determining factor. All a lawsuit funding company is interested in is the quality or the personal injury case that is used as collateral for the lawsuit cash advance.

6. Can't I obtain the money I need from a bank or family member?

Banks and other financial institutions require good credit, employment, and collateral. Traditionally, they will not provide a loan against a pending lawsuit. They also will not excuse the loan if you lose the case. A lawsuit funding company, however, will. You can certainly borrow money from family or friends, but, if you lose the case and can't pay the money back, the family member may not excuse the obligation and your inability to repay may damage an important relationship.

7. Is this a lawsuit “loan”?

Lawsuit funding is not a loan; it is an advance on the future value of your case. A loan must be repaid whereas lawsuit funding is a non-recourse cash advance meaning repayment is only required if, and when the plaintiff wins. If the plaintiff loses the funded case, the entire obligation is excused. With a loan, you do not get excused from the obligation if you lose the case. With lawsuit funding, your case is the only collateral and, if you lose, the debt is forgiven. If you win your case at expected levels, you are obligated to repay the advanced amount plus contractual profit. If you win or settle your case, but the result is disappointing a reputable lawsuit funding company will often offer a results appropriate compromise.

8. Is there an application fee, monthly payments, or other upfront out of pocket expenses?

No--an ethical, professional lawsuit funding company provides you the cash you need and patiently awaits the outcome of your case. There are no up-front fees or monthly payments of any kind. All payments are due at the time the case is settled and only if you receive payment on your lawsuit. There should be easy-to-understand repayment requirements; they should be specific and due only if you win or settle your case.

9. What is the attorney's role?

The client and attorney are required to complete an application; usually a simple, one-page form that can be completed online or over the phone. The attorney sends the lawsuit funding company a completed form with minimal case records for review of the case. A funding decision can usually be made within 24 hours of receipt of the attorney questionnaire and the records. Upon approval, the client and attorney must sign a funding agreement acknowledging the terms including withholding money from the settlement to repay the advance, if the case is successful. The attorney must agree to the repayment procedures and send a check to the funding company when the case is complete.

10. How much money can I receive from a lawsuit funding company against my case?

It's recommended that a plaintiff receive no more than 10% of the predicted value of the case, and that plaintiffs take small advances over time, rather than a lump sum up-front. Lawsuit funding should only be used for serious financial need such as mortgage or auto payments. The maximum lawsuit cash advance is based on the projected value of the case. Lawsuit funding is for serious needs, and only if the plaintiff is inclined to settle the case for a lower-than-full-value offer to get the quick cash.

11. How does lawsuit funding help me achieve better results in my lawsuit?

There are no guarantees of a higher settlement just from receiving lawsuit funding, however, it does take away the financial pressure of settling too soon for too little. A desperate plaintiff is not a positive influence on settlement negotiations. Insurance companies will do anything they can to delay or deny payment. Don’t feel pressured to settle too early, for too little; lawsuit funding can be an excellent alternative so you can pay your bills and expenses now, while you give your attorney the time he/she needs to fight the insurance company for fair compensation in your lawsuit.

12. If I am approved, how long does it take for me to get the funds?

Upon receipt of an application, the attorney will need to complete an attorney questionnaire and provide minimal case documents for review. Approval is dependent entirely on the strength of your case. Upon approval, a contract must be signed by the plaintiff and attorney. Once executed by all parties, funds can be available within 24 – 48 hours.

13. How is the lawsuit cash advance repaid?

The cash advance will be repaid by the attorney from the settlement or verdict proceeds at the same time the plaintiff is paid. The attorney notifies the litigation funding company of the settlement, confirms the amount due, and withholds and pays the funding company the amount due. Of course, if you lose the case, you owe nothing; you keep the lawsuit cash advance, free of charge.

14. Does anyone involved in the lawsuit have to know about this? Is the insurance company notified?

No, there are only three parties to a lawsuit funding agreement, you, the legal finance company and your attorney. The defendant, his/her insurance company, the judge or the jury will have no knowledge of the fact that you received lawsuit funding.

15. Can I use my lawsuit cash advance for any reason I want?

You can use a lawsuit cash advance for any reason, however because lawsuit funding is contingent upon the outcome of your case, profit on the funded amount tends to be on the expensive side. Thus, it is recommended that you only use it for an important obligation such as paying your mortgage or auto payments; he does not recommend that you go on a shopping spree.

16. Can I only seek seeking funding once? What if I need additional assistance later?

As long as you have a pending lawsuit and the projected case value can handle the additional funding, most lawsuit funding companies can re-evaluate the case for an additional cash advance. In order to save money, it's best if a plaintiff receives smaller cash advances, over time, rather than receiving a larger, lump sum advance immediately.

17. Does the litigation funding company become involved in the lawsuit?

The litigation funding company has no role in the handling of the case. The only involvement is to initially review the attorney's file to evaluate the claim and determine if funding can be provided. The legal finance company has absolutely no input on anything you or your lawyer determines is best for you and your case; all decisions are between the plaintiff and his/her attorney.

18. Why can’t I get the money I need from my attorney?

Most states prohibit attorneys from loaning money to their clients. Attorneys are permitted to advance case costs for a client, but state ethics boards have almost unanimously prevented attorneys from loaning money to clients. The primary reason for this is because the ethics community wants attorneys to think only of the client and the client’s best interest, not about getting the attorney’s own money repaid. Lawsuit funding companies do not place themselves in a conflict position with the client. By contrast, lawsuit funding companies take a passive interest in the case, are not involved in the decision making process, and, as such, do not pose conflict of interest situations.

19. Are these transactions confidential?

Most lawsuit funding companies will tell you that the process is confidential. The question is whether or not confidential information, if released to a lawsuit funding company, loses its confidential nature. Some argue that released information that was not intended for the defense can be discovered because it was released to a lawsuit funding company. Because of this, it's recommended that the attorney only release records that he/she knows will be released to the defense. The information should be used for the sole purpose of considering a case for a lawsuit cash advance. A plaintiff should only seek lawsuit funding from a company that views documents and opinions it receives as attorney-to-attorney confidential disclosures.

20. What criteria will determine whether I get approved or denied?

Approval is dependent entirely on the strength of your case. Credit standing, job status, and asset to debt ratios are irrelevant. If your case has a “more likely than not” chance of success, it will probably qualify for funding. If a settlement or verdict is collectable (insurance proceeds available and sufficient) and your attorney is cooperative (a cooperative attorney is vital to the process) you can and will be funded. This staying power not only increases the plaintiff’s share of the insurance proceeds, but the attorney fee, as well. The only party that benefits from the plaintiff settling too low because he/she needs money now, is the insurance company.