Lawsuit Settlement Funding

There are two types lawsuit settlement funding, pre-settlement and post-settlement. The primary purpose is to ensure the plaintiff and the attorney is supplied with sufficient funds to cover expenses until the end of a long litigation.

Pre-settlement funding is money paid to an injured client before a settlement amount has been finalized. This is done in an attempt to help victims cover their expenses, including the cost of an attorney. Often plaintiffs may be unable to work due to their injuries and they will also be incurring large amounts of debt from hospital bills as well as legal fees. Pre-settlement funding can come from several sources. The plaintiff’s attorney, a settlement funding company or an insurance agency may advance the money. If the source of the payment is an insurance agency or a specialized funding company, the financing will be treated almost as if it is a loan and must be repaid with interest. However, there are several different types, all with different stipulations.

One concern is that this type of loan can be attached to exorbitant fees in order to safeguard the company lending it. If the settlement is less than the loaned amount, only that amount is due. In cases where the person loses his or her case, no money is paid back. Generally, funding amounts are between $500 and $25,000.

Post-settlements are less risky. As the name suggests, it takes place after the case has been decided. In this case, the funding agency buys the legal firm’s legal fee at a discount price and recoups the full amount at a later date.

Of the two types of funding, the pre-settlement is of the most risk to the lender, and the client stands to pay heavy fees. For this reason is it strongly advised that all other options are scrutinized prior to accepting the charges.