When people are in the midst of a lawsuit, money can often become an issue. Litigation can often take months or even years. So what is a person to do? Enter Pre-settlement lawsuit funding. Pre-settlement funding is when an injured party is given a cash advance against the outcome of their pending lawsuit. The process of pre-settlement funding is fairly simple: the finance company who will provide the funding will contact the attorney handling the case to get the information. Based on this information, the finance company will then estimate what the value of the settlement will be and issue a cash advance based on that estimate. The amount of this advance can be anywhere between $500 and $25,000.
Sounds good, right? Not so fast. You should proceed with caution.
Determine if you really need it. There are times it may be necessary. But before you take that plunge, ensure that you have thoroughly done your research. Seek professional advice from a financial advisor, accountant and of course a competent attorney familiar with this type of tool. There are a lot of companies that are quick to offer pre-settlement lawsuit funding. That in itself should be a red flag. It is an extremely profitable venture for them and one that can be costly for you if not handled properly.
It is also important to remember that often times, even if you lose a lawsuit, you will likely be required to pay back what is in essence, a loan. As a loan, it works the same way as most others do but with one caveat, the interest rates are usually much higher than those of a normal loan. This is due to the fact that pre-settlement funding loans are considered short term and not long-term. Therein lies part of the problem. If you lose the case you not only may be penalized, but you will be required to pay the entire amount back plus any accrued interest. There are substantial fees associated with pre-settlement funding so it’s important to be sure to have all of the information before you jump into this type of agreement. These fees come from the risk that the lender absorbs by advancing the cash on a non-recourse agreement. Those who are in a bind and considering this arrangement should be sure that all other options have been exhausted before signing on the dotted line.
If you would like to speak to someone at our firm about this or any other legal matters, you can call us at 844-847-8300. You can also visit our website at www.therussofirm.com.