You are driving, obeying the traffic signals, traveling at the legal speed limit. When you get to the intersection, out of nowhere, a car runs the light and barrels into you, causing a T-bone collision. In seconds, the airbag inflates, your car is totaled, and you cannot feel your arms or legs.
The ambulance rushes you to the hospital, where they immediately run tests and eventually perform surgery. Months spent in the hospital with no income and a piling stack of medical bills and living expenses, you feel stressed. You have filed a suit but your attorney says it will take months before you see a day in court, let alone a settlement, if you are awarded one. What do you do?
The truth is, even if you are not responsible for your predicament, you still have payments to make. Which is why, depending on your financial situation, pre settlement funding could be the option for you. Find out what it is, who qualifies for it, and how the process works, plus more.
What is Pre Settlement Funding?
Pre settlement funding is a cash advancement given to you in exchange for a percentage of your settlement (should you win). In other words, if approved, you receive a portion of the expected settlement up front. Should you not win, you do not need to pay back the advance.
Who May Need It
Each situation and case is different. However, in general, individuals who need funds while their case is pending or settlement is finalizing may be qualified to receive pre settlement funding.
Cannot Pay for Living Expenses
Specifically, the individual cannot pay for living expense (e.g. utilities, food, gas) and bills are mounting up. The plaintiff is not able to afford their child’s college tuition, unable to work to provide an income.
Eviction and Homelessness Are Possibilities
With mounting legal, medical, and living expenses, individuals waiting for trial may not be able to pay for their mortgage or rent. Eviction and homelessness become real possibilities.
Need Fast Cash
Bills need to be paid today. With no available funds or source of revenue trickling in, the individual needs money fast in order to not just pay off the accumulated debt but day-to day expenses such as water, toiletries, and food.
Traditional Financial Routes Are a Dead End
Traditional financial routes—such as a traditional bank loan or line of credit—may not be an option if he or she has a poor credit history and no proof of stable employment.
Generous Donations from Family and Friends May Not Be Enough
While he or she can financially rely on generous donations from family and friends, legal costs can become expensive. If the plaintiff sustained injuries from the accident, he or she may have unpaid medical bills. Given that most cases take months if not years to go to trial and reach a settlement, the generous donations may not be enough to get by.
If you find yourself in this type of situation, pre settlement funding may be a viable option for you.
Not Every Case Is Approved
The truth is, pre settlement funding companies do not approve every pre settlement loan application. Cases with a high chance of not being awarded a settlement most likely will be denied.
Remember, legal funding companies are rolling the dice; they want to increase their odds by “betting” on cases with a high chance of receiving a settlement. Overall, approval is dependent on the level of risk and length of time the pre settlement loan remains outstanding.
Eligible Cases: While Not Every Case is Approved, Which Cases Are?
Generally, if you have a case where a settlement is expected, you may be eligible for funding. Eligible cases include motor vehicle accidents, discrimination, medical malpractice, police brutality, wrongful imprisonment, railroad accidents, and more.
However, even if your attorney determines your case is an easy win, pre-settlement funding underwriters need to look over it, as well as your pre settlement loan application, to see if your case is worth the risk. The underwriter does not look at your credit history or employment record—again, it all boils down to perceived risk.
How the Process Works
Every pre-settlement funding company is different. Typically, you fill out a pre settlement loan application. After filling the application out, your attorney will receive a request for documentation on your case. In which case, your attorney sends it over for the underwriters to look over and determine if you are a good candidate. 24 to 48 hours later, if you are approved, the pre-settlement loan company will notify you of your cash advancement. If you choose to accept the advancement, a contract will be drawn up between you, your attorney, and the pre-settlement company. After signing the contract, you will have access to the advancement amount.
After Receiving the Cash Advancement
While your case is pending, you can use the cash advancement however you like (just as long as it is legal)—you can pay off medical and legal expenses, spend it on food and clothes, etc. If you need more money, re-financing may be an option.
If You Are Awarded the Settlement
Your case goes to trial and a settlement is reached. An agreed-upon settlement percentage will go to your attorney (who is working on a contingency basis). And a percentage of the settlement will go to the pre-settlement loan company to pay back the cash advancement (along with the interest) the company gave to you. (Some pre settlement funding companies do accept a fixed settlement amount.)
Here is What Could Happen Even If You Are Awarded a Settlement
The reality is, even after going to trial and reaching a settlement, finalizing it could take several months for a number of reasons. Court delays push the finalization process even further back. Depending if the case was a class action suit, finalization could take longer since the settlement is divided up among multiple people.
Difficult defendants, not wanting to accept the verdict, may push for an appeal, in which the case is taken up with a higher court to try to get it overruled. No matter what the reason is, finalization could take a long time; it could take months before you physically see the awarded settlement amount in your hands. For that reason, you may need more funding.
Final Thoughts on Pre-Settlement Funding
If you find yourself (unfortunately) on the receiving end of an unfair, unlawful situation and file a suit, you may be waiting to go to trial for several months, perhaps even longer. With increasing debt and possibly facing eviction and traditional financial institutions turning you down, a pre settlement funding company may be able to give you access to the immediate funds you need.
With the payment gap patched and not needing the money from the settlement as soon as possible, you do not have to accept an unfair settlement amount and can negotiate longer until you reach an amount that is fair to you. Since not all pre-settlement funding companies are the same, we recommend that you conduct thorough research and discuss all financial options to make sure this is the right one for you. Do you have experience with a legal funding company? Did you receive a settlement from your case? Leave a comment below.
- You may be the victim of illegal activity
- Even though your attorney says you should receive a settlement, you have piling expense you are struggling to pay off
- With the trial date months away, you cannot afford to wait any longer
- Facing eviction, with traditional institutions rejecting you, pre settlement funding from a legal financing provider may be an option
- Approval does not depend on the type of case, but on the risk level and length of time the advancement would be outstanding
- Cases with a low chance of being awarded a settlement are usually turned down
- If you decide pre-settlement funding is the right financial choice for you, begin the process by filling out an application
- After getting a call from the legal funding company, your attorney (with your permission) will send them your case information
- An underwriter will go over your case and let you know in one to two days if you are approved
- If you are and you and your attorney sign the contract drafted by the legal funding company, you receive the cash advancement
- As long as it is legal, you can use the advance on anything
- Re-financing may be an option should you need it
- If you are awarded a settlement, a portion of it goes to the legal funding company to pay for the cash advancement and interest (after your attorney receives a percentage)
- It may take time for your settlement to be finalized
- Reasons include among others: court delays, difficult defendant, class action law suit
- Every legal financing company operate differently; for that reason, do your research
For more information about pre-settlement funding, contact Legal-Bay.
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