Litigation Funding

Pursuing a lawsuit can put a strain on your finances. But litigation funding can provide a feasible financial lifeline to support your case and living expenses.

If your personal funds are running out, and your case still hasn’t made it to court, consider litigation funding. It bridges the gap from your accident date to the settlement date. Litigation funding can provide you with cash advances for the duration of your case.

Lawsuit financing is not a loan. The funding company buys a piece of the future settlement proceeds of your lawsuit, contingent upon the future outcome of the case. Essentially, you receive cash today in exchange for a specific amount of any settlement or judgment received from the litigation. Most often, lawsuit funding is used to cover medical and immediate living expenses.

Litigation funding is available for all types of cases, including personal injury, medical malpractice, employment discrimination and wrongful death cases.

Understanding Lawsuit Financing

Technically, llitigation funding is a practice in which individuals who are plaintiffs in lawsuits receive money from a lawsuit loan company who takes a lien on the proceeds of the suit in return for cash now. Funding is provided on a non-recourse basis. This means any money you receive is yours to keep even if the results of the case have a negative outcome.

Companies generally will provide litigation funding to individuals who have a strong case. For them, the cash advance is an investment. If you win, they receive a portion of the monetary award granted to you by the court. If you lose, they get nothing.

In essence, litigation funding poses no risk on your part. You never have to repay the funding company if your case is unsuccessful in court. But if your case wins, you’ll probably end up with significantly more money than you would have if you settled early. That’s even after you present the funding company with its portion of the settlement.

The Need for Litigation Funding

Litigation is an expensive process. For most people with personal injury claims, a lawyer is hired on a contingent fee basis, meaning there is no attorney fee unless the case is successful. Then, any attorney fee that’s required is a percentage of the money recovered. The law firm advances money for the cost of litigation until the case is resolved. (For ethical reasons, lawyers cannot lend money to their clients.)

However, for individuals paying legal fees “out of pocket”, the need for litigation funding can be critical. Here’s why: People who have been severely injured in accidents due to the negligence of others can be financially devastated during the process. Many are put out of work for weeks or months, leaving them with no income to provide for their dependents while they recover. Unfortunately, these victims often lack the proper income or credit history to qualify for a traditional loan. Even if they could, conventional loans require monthly payments which can be a further burden to their situation.

Litigation funding is a viable option for cash-poor plaintiffs. It can help them meet their living expenses, pay for medical care and cover other personal costs. This can keep plaintiffs from having to sell their valuables or borrow money from family and friends to keep their lives on track.

Lawsuit financing enables individuals to pursue justice without having to put their life on hold by sacrificing other necessary financial responsibilities. Instead of worrying about finances, they can focus on recovering from their injuries while they await a trial verdict or settlement.

Working with a Funding Firm

There are a growing number of companies offering litigation financing. Pursuing funding from these sources is fairly straightforward. You simply contact the provider for a free consultation. The company will follow up with your attorney, evaluate your case material and let you know—often within 48 hours—if you are eligible for lawsuit funding. Typically, no application fee, credit check or employment verification is required.

If approved for lawsuit funding, your attorneys will retain complete control over your case. The funding provider will not get involved with your case strategy and or receive payment until after the case is settled.

When choosing a funding firm, asking questions about the practices, fees and conditions involved.

The American Litigation Finance Association (ALFA) offers some useful tips to help you locate suitable lawsuit financing:

• Deal with a company that is investing for its own portfolio. Otherwise, you could wind up paying a great deal more than necessary.
• Don’t supply information that is not otherwise discoverable. Privileged information should only be shared with your attorney—not a third party.
• Don’t make multiple applications with different funding companies. You have no way of knowing if that company is going to try to sell your deal to one of the others to which you have applied (which will not sit very well with the real funding source). Besides, multiple applications create a hassle for your attorney since he or she will have to complete many requests for information. Your best approach is to make an informed choice and work with that company.
• Check with your attorney. Never sign a complex contract such as a lawsuit funding agreement without consulting with your attorney first.
  

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