Let’s face it. Suing someone is usually expensive. It is almost always time-consuming. Depending on the specific circumstances of any given case, it can take months – or even years to take the matter to trial. Reaching a settlement in or out of court can also be a lengthy and stressful process.
This is especially difficult for plaintiffs in personal injury cases. Many times, their injuries preclude them from working for weeks, months or even longer. Meanwhile, the bills keep coming in. With little or no income, they may be forced to dig into their savings, use credit cards or even take out loans just to cover regular living expenses.
This can be catastrophic, especially if the person who gets hurt is the family’s primary – or sole – breadwinner.
Fortunately, pre-settlement funding is available to plaintiffs in many cases. This type of alternative financing provides the cash a plaintiff needs to help make ends meet until his or her case is resolved.
What is pre-settlement funding?
Pre-settlement funding is a type of funding that can be available to plaintiffs in civil suits such as personal injury, car accidents, wrongful death and workplace accident cases. Plaintiffs in medical malpractice, product liability and employment lawsuits may also be able to take advantage of this type of funding.
Pre-settlement funding is also known by other names, such as a “pre-settlement advance,” a “lawsuit advance,” or “lawsuit funding. ” Regardless of its name, this type of financing is easily distinguished from traditional funding mechanisms.
To secure a conventional loan, you must usually go through a credit check and similar vetting as part of the application process. Among other things, this means the process may take awhile, and there is no guarantee you will qualify for a personal loan if you don’t have good credit. Even if you can get a traditional loan, you must start paying it back straight away.
Conversely, pre-settlement funding does not usually require a credit check or similar vetting as part of the application process. Therefore, the application process is much faster and easier. That means you can usually get the cash you need fairly quickly. Because pre-settlement funding is really just cash received ahead of your settlement, you do not need to start paying it back immediately. Instead, the amount provided plus any applicable charges, is taken directly from your settlement. Provisions in the pre-settlement funding agreement usually address what will happen if your case isn’t settled in your favor or the settlement doesn’t cover the amount of the advance after other deductions are made. Many pre-settlement companies provide funding as nonrecourse, which means if you lose your case you are not required to pay them back.
How does it work?
To obtain pre-settlement funding you must have a personal injury claim and you must also retain a lawyer, who will not only represent you, but also try to negotiate the best-possible settlement for you.
The next step is to research and contact pre-settlement funding companies. Be sure that the company you choose has a solid reputation. Once you have chosen a company, contact them to begin the application process. The company uses the information you provide during this process, and information provided by your attorney, to assess the details and merits of your case. It will also estimate how much you may get in a settlement or verdict. It will decide how much funding to provide based on its findings.
The next step is perhaps the most important. The pre-settlement funding company will send you and your lawyer a pre-settlement funding agreement. It is crucial that you and your attorney review it carefully, because it includes terms and conditions you must abide by if you accept the funding. This agreement often includes provisions pertaining to what will happen if the case is not settled in your favor or if the settlement amount does not cover the pre-settlement funding amount after other deductions are made. Because it is only a proposed agreement at this point, your lawyer can identify any terms that may be unfair and may negotiate better terms for you.
Finally, you must decide whether pre-settlement funding is the best – or only – option for you. One of the factors you may want to take into consideration is how long it will take to settle your case or get a jury verdict. Weigh this against your monthly expenses and how much pre-settlement funding you can get, and the terms of your pre-settlement funding agreement. You may find that a personal loan, using low-interest credit card, or short-term disability assistance is a better option. In a pinch, borrowing from friends or family may also be a better choice in the long run.
Getting the cash you need, when you need it
Let’s assume you have decided to apply for pre-settlement funding and you get approved. A reputable firm will generally provide you the funds within 24 to 48 hours once approved. It may take longer in some cases. A trusted pre-settlement funding company will tell you if there are any delays, and explain why the transfer is taking longer than expected.
Don’t forget to have your attorney scrutinize the terms of a pre-settlement funding agreement before you sign it. You should also make sure that your attorney addresses all of your questions and concerns so you fully understand the agreement before you sign it.
Getting additional pre-settlement funding
In some circumstances, you may find that you need more money than you initially anticipated while your lawsuit is pending. If so, you may be able to get more funding from the same provider, or from a different firm. In either case, you should tell the provider that you are applying for additional funding. The pre-settlement funding company will take that and other factors into account when it reviews your application.
Don’t forget to ask your attorney if seeking more pre-settlement funding is a viable option for you.
Other options to consider
If you are a plaintiff in a pending law suit and you need some “quick cash,” there are options other than pre-settlement funding. First, you can ask your lawyer to try and negotiate a quicker settlement. Keep in mind, however, that this may mean you could get less money. If need be, you could also submit applications for a personal loan or credit card.
If you were badly hurt and your injury precludes you from going back to work, ask your lawyer about your eligibility for state or federal disability benefits. In a worst-case scenario, you may also be able to borrow some money from a friend or relative.
How do you know pre-settlement funding isn’t a scam?
As of June 2019, at least 10 states had laws on the books regarding consumer litigation financing. Others were pondering regulations to protect the public from predatory lenders.
So far, these states have implemented the following measures:
- Arkansas, Tennessee, and West Virginia implemented laws limiting rates on pre-settlement advances.
- Indiana, Oklahoma, Vermont, and Wisconsin have placed some requirements on litigation funding agreements.
- Maine, Nebraska, and Ohio enacted legislation that codified pre-settlement funding practices, but did not impose significant restrictions on the practice.
For the most part, the pre-settlement lending industry has welcomed these regulations. In some cases, industry experts have even addressed lawmakers to help them craft applicable legislation.
Where is pre-settlement funding legal?
Because pre-settlement funding is fairly new, only a few states have actually implemented regulations. Others are considering taking similar actions. Unfortunately, court rulings or regulatory decisions in some states make it impossible for pre-settlement funding companies to do business there. Be sure to review a pre-settlement funding company’s website to see if it serves consumers in your state.
Before you commit to pre-settlement funding have a serious talk about this options with your attorney. He or she can provide the information you need to make an informed decision.
Oasis provides pre-settlement funding, also known as consumer litigation funding, to its customers through different products depending on their state of residence or cause of action. Many consumers will be provided pre-settlement funding in the form of a purchase agreement, which assigns a portion of the pending proceeds from their legal claim. Other consumers, such as those in CO, IL, MN, MO, SC, WI and some OK residents, will be offered a funding in the form of a pre-settlement loan, sometimes referred to as a lawsuit loan. These transactions have important differences, therefore, consumers should carefully review and be aware of the type of transaction that is offered to them by any funding company.