Pre-settlement funding is a financial tool that is being used by plaintiffs throughout the United States. Pre-settlement funding is a non-recourse loan against a pending lawsuit. Against commercial litigation and personal injury, claims companies provide this financial tool. The plaintiff agrees to use their lawsuit as collateral after burrowing money is borrowed by a plaintiff. The plaintiff will be responsible for paying back the principle with interest if the suit is successful. They don’t have to pay back the advance If the plaintiff loses the case.
Helping plaintiffs get through the litigation process is the main reason why lawsuit settlement funding is used. They may be forced to settle a case early if a plaintiff has a financial need. They may borrow against their lawsuit, without having to settle for less if the plaintiff doesn’t have the financial capacity of waiting for a settlement.
Most companies won’t lend if the money is used toward the legal fees for a case while pre-settlement funding provides financing to the plaintiffs for ongoing litigation. There is a process that a pre-settlement funding company will take before providing the advance in order to qualify for an advance against your case. A company will request documentation on the lawsuit and contact the lawyer who is handling the case. The strength of the case is assessed by using the documentation. They may provide lawsuit funding to the client, the plaintiff has no other liens on the suit (besides the attorney fees) and If a company believes there is value in the settlement or verdict.
Motor vehicle accidents, slip and falls, wrongful death and medical malpractice suits are the most common types of accidents companies will consider are. Depending upon the lending source some companies will provide funding for soft tissue injuries and catastrophic injuries.
It is important to understand that pre-settlement funding should only be used if you have a pressing financial need.
Benefits for both Client and Attorneys
Pre-settlement lawsuit funding – also known as litigation finance, settlement advances, lawsuit advance, post-settlement funding, cash advance, etc. – based solely on the merits of a pending case or settlement is the process of providing cash advances to clients and attorneys.
Pre-Settlement Advances are cash advances on pending litigation. The funding company can only look at the lawsuit itself for repayment. It is not a loan. It is simply an assignment of a portion of the client or attorney’s interest in the anticipated recovery of the lawsuit. If there is no recovery, there is no re-payment. Is it ethical for attorneys to refer their clients to pre-settlement advances? Yes. Till then:
1) in the lawsuit funding company the referring attorney has no financial interest; 2) the referring attorney does not profit from the transaction, and 3) the lawsuit funding company is not involved in the litigation of the pending lawsuit. The benefits of referring clients to litigation finance companies are obvious – easing financial woes, providing immediate financial assistance during tough times, and being able to hold out for a better settlement.
The Pre-Settlement Advance process is simple. A completed two-page application is required to evaluate the lawsuit. The merits of the pending litigation will be evaluated and all questions/concerns regarding the lawsuit are directed to the attorney handling the lawsuit.