Facing a lawsuit can be a daunting situation. Waiting on a final outcome can be stressful. And if your lawsuit is for a personal injury, you may be dealing with lessened or terminated income while being out of work due to your personal injuries. With that comes inevitable financial woes as you try to keep up with your bills and legal fees, all the while waiting out the many months—or even years—until your case settles.
Even if you have a rock-solid case and a talented lawyer, legal funding can be a viable resource for plaintiffs struggling to make ends meet as they wait for their cases to be resolved, and has proven to be a valuable financial solution for both attorneys and their clients in recent years.
1. WHAT IS LEGAL FUNDING AND HOW CAN IT HELP ME?
If you are the plaintiff in a lawsuit seeking monetary damages, you may have stumbled upon the term “legal funding.” While it could mean a way to help pay legal fees (more on that later), in most instances, legal funding is actually a pre-settlement cash advance. In essence, legal funding is a way to obtain money from your expected settlement even before your case goes to trial.
What that means is that you don’t need to wait for your case to conclude before you can receive a portion of your anticipated settlement. In fact, most reputable settlement companies will be able to get your cash in hand in less than 48 hours.
Many consumers who have a pending lawsuit and need cash before their cases settle will research a “pre-settlement loan” or “lawsuit funding loans” when in actuality, legal funding isn’t a loan at all.
The reason why is because there is no recourse from the funding company if your case ultimately fails. That means you don’t have to pay back the funds if you lose your case. No monthly payments; no interest fees. With a loan, the borrower has to have collateral and credit, and be prepared to incur fees and interest charges. Since legal funding is not a loan, credit approval isn’t needed to qualify. Funding is based entirely on the merits of the case, and nothing else, which is why legal funding is a no-risk proposition for the consumer.
2. HOW MUCH WILL LEGAL FUNDING COST ME?
Some aggressive pre-settlement funding companies charge an application fee, an origination fee, or some other kind of exorbitant processing fee which can cost hundreds of dollars, and if they go through a broker (as opposed to being a direct funder themselves), the added costs can be staggering. Your application should be reviewed for free, and any payback fees should be lain out clearly in your contract before you sign.
Costs can range from 1.99% per month to 3.99% per month in compounding interest. Most have rates ranging from 30% to 60% annually, and there are also different types of contracts that charge no more than 200% of the amount funded. Every funding company is different, but the money is not free. Remember, the funder is taking a risk by investing in your case since they don’t get paid back if you lose. So, naturally they need to get a competitive return.
It is important for a consumer to speak to a reputable legal funding company that has fair rates and fees to ensure that when it comes time to settle your case, your settlement loan company doesn’t take the lion’s share of the settlement.
In addition, a legal funding pre-settlement contract offers a previously determined payback amount. No interest or surprise fees. Some legal funding companies may seem affordable in the beginning, but with escalating compound interest, you may soon find that you owe the lenders so much that it cancels out your lawsuit settlement. You’ll want to make sure you’re dealing with a reputable funding firm so that you don’t get hit with unexpected charges.
3. HOW CAN I OBTAIN LEGAL FUNDING?
If you’re looking to obtain legal funding, the first thing you’ll want to do is speak to your lawyer, or at the very least, your case manager. He or she will be able to point you in the right direction toward a reputable funding company, one that will be able to expedite your approval process. If your lawyer can’t recommend a legal funding company, it may be time to take matters into your own hands.
A simple internet search is a good way to get started. You can search terms like “presettlement lawsuit funding” or “legal funding cash advance” or “legal funding for lawsuits.” It will be best to also specify your state, and it couldn’t hurt to plug in a few relevant keywords about your type of case. That will ensure you receive the most relevant search results for legal funding companies that will be a good match.
The most important thing in picking a funding company is to ensure that they are a direct funding source. What this means is that if you call a funding company and they are simply a broker sending your case to another funder, then most of the time you are going to pay more because of broker fees. Most reputable funding companies want you to get a fair deal; those are the ones you want to work with.
The approval process is pretty straightforward and easier than you might think. The first step will be to fill out a preliminary application with the legal funding company. Generally, the information they are looking for will be your basic contact information, the type of case you’re litigating, and the name and phone number of your attorney.
Once the application has been completed, the funding company will immediately contact your attorney to request any legal documents that can assist them in evaluating your case. Most funding companies won’t ask your lawyer to fill out a lengthy application on your behalf; they simply need to request a few key documents to help assess the merits of your claim.
Once the lawsuit funding company determines there is merit to your case, you will very likely be approved and a cash advance can be obtained within days.
4. WHAT DOES MY ATTORNEY NEED TO KNOW?
Lawyers need to become educated on legal funding so they can counsel clients on their options. Even if lawyers do not recommend legal funding, clients may still seek it out on their own. Therefore, lawyers should at least familiarize themselves with the basics.
Legal funding is commonly recommended during all types of cases. When plaintiffs stand to gain significant settlements, the defendants may drag a case out in hopes that the plaintiff will settle for less. Legal funding allows the plaintiff to hold out for a much larger settlement down the line.
Battling a lawsuit is a time-consuming process. While awaiting a resolution to their case, plaintiffs may be financially strapped for basic needs such as food, rent, or medication. Attorneys tend to spend an exorbitant amount of time trying to solve their clients’ financial issues instead of focusing on the details of the lawsuit. As a result, the case becomes compromised and the attorney becomes frustrated by an inability to provide the level of legal expertise the client deserves.
Nothing is more disheartening to an attorney than watching a client being forced to accept an early settlement because they can’t afford to let the legal process run its full course. Legal funding gives attorneys the time they need to press for the settlement their clients deserve. It allows them to devote their time and resources to the actual lawsuit by empowering clients to better handle their financial issues on their own. Basically, legal funding allows lawyers the freedom to practice law… instead of playing financial advisor.
5. IS LEGAL FUNDING RIGHT FOR ME?
If a person has suffered an injury or loss due to someone else’s negligence, they may suddenly need money to help cover a wide range of unexpected damages such as medical bills and lost wages. Basically, the number one reason that people take funding from their pending lawsuit is to pay their bills. Whatever those bills may be: Mortgage, rent, car payment, utilities, college tuition, surgery, back-to-school costs… Even for starting a new business or financing a vacation; anything that the consumer wants to use the money for, they can. The choice is up to them to decide if a monetary influx is important to their needs at this time.
Most legal funding companies focus their efforts on automobile accident and personal injury cases. Personal injury cases can include slips and falls, premise liability, medical malpractice, and construction accidents, amongst others. However, many legal funding companies will consider almost any case in which there is liability, damages, and insurance, such as wrongful termination, discrimination, sexual harassment, sexual abuse, and more. Plaintiffs have been awarded a cash advance for lawsuits of every kind. A good legal funding company will find a way to get you the money you have coming to you.
In short, legal funding provides a superior financing option for plaintiffs looking into income alternatives. For many plaintiffs, legal funding may be the only way to get money for basic living needs. In addition to the advantages already mentioned above, legal funding buys a plaintiff time and freedom to make better decisions in regards to their case. Plaintiffs dealing with financial stress don’t have the luxury of time to wait out a lengthy legal process. With legal funding, plaintiffs do not have to accept a lowball settlement offer simply because they can’t afford to wait any longer.
Oh—and remember reading above how legal funding could mean money to help pay legal fees? Well, in most cases, the settlement amount of a successful lawsuit is enough to repay not only the cash advance, but any fees associated with your lawsuit. It’s a great way to give yourself a head start on rebuilding your life.
The bottom line is that legal funding helps plaintiffs solve their financial problems and could allow them to wait out the many, many months until their lawsuit sees the inside of a courtroom. It also allows plaintiffs to hold out for the largest settlement possible. Just because most court cases can take a long time to settle doesn’t mean that you should have to wait to get paid. Legal funding exists for this very reason. Rather than wait out the many months for a final ruling on your case, you could get a cash advance within days.
As Legal-Bay is one of the best pre settlement funding companies in the industry, we have over twenty years’ worth of knowledge to share with you, and some of the lowest cost pre settlement funding rates in the business. We’ve been doing this a long time, and we know what our customers need and expect from us.
We’d love to speak with you and answer any questions you may have. Please feel free to contact us for more information on how you can obtain legal funding.