If you need money to help make ends meet while your lawsuit is pending, settlement funding could help

Put in its simplest terms, a settlement funding is one form of financing available to plaintiffs in some civil lawsuits. But unlike a traditional loan, which a qualified borrower can secure anytime, settlement funding is only available while a case is pending. This is because it is actually a cash advance made against a settlement or judgment in a civil case.

This may be a viable option for you if:

  • You were injured in an incident caused by someone else;
  • You hired a lawyer and sued the responsible party
  • You need money to cover living expenses and/or medical costs while your case is pending

Here’s how settlement funding works

A settlement funding company will usually issue a cash funding to a qualified applicant who is awaiting the outcome of a:

  • Personal injury case (one in which you were hurt in an accident caused by someone else’s carelessness)
  • Motor vehicle accident case
  • Workplace or work-related accident case
  • Slip and fall (premises liability) case
  • Medical malpractice case
  • Product liability case (one in which you were injured by a defective product)
  • Wrongful death case (one in which another person’s carelessness causes the death of a loved one)

To decide if you’re eligible, the settlement funding company assesses the information about your case provided on your application. It will also consult your attorney to get a better idea about the strength of the case, the likelihood that it will be resolved in your favor, and the potential value of a settlement or judgment.

Because they assume considerable risk, settlement funding companies will only make advances to plaintiffs in cases with the best chances for success.

If you do get settlement funding, you’ll be liable for any interest and fees in addition to the principal. The good news, however, is that you don’t usually have to make any payments until your case is settled or you receive a judgment. Once a settlement is reached, your attorney fees and related costs will be deducted from that amount, followed by the amount of your settlement funding and fees.

Common uses for settlement funding proceeds

In most cases, people who apply for settlement funding do so because their injuries prevent them from working while their lawsuits are pending. As a result, they are often faced with the daunting prospect of mounting debt and limited options. In such circumstances, the money from settlement funding can be used to pay medical bills and cover day-to-day expenses.

What happens if the case isn’t resolved in my favor?

There are two possible outcomes if your case isn’t successfully resolved. The first is that you won’t get anything at all. The second is that your settlement or judgment is less than expected, and less than you agreed to repay.

In either scenario, this begs a question if you also have settlement funding,are you liable for repayment?  The answer depends on how your settlement funding agreement is structured

Even if the settlement or judgment is less than expected, and less than you agreed to repay, the settlement funding company won’t necessarily be able to demand the difference. Instead, it may only be able to claim whatever settlement proceeds remain after other costs have been paid, such as attorney fees and court costs.

Benefits of settlement funding

Settlement funding is appealing for several reasons:

  • You’ll get money for living expenses: Settlement funding is a source of cash that can be used for day-to-day expenses and medical costs while your case is pending.
  • In most cases you don’t need good credit to get one: Unlike traditional lenders, settlement funding companies don’t necessarily consider your credit rating when determining your eligibility for funding. Their focus is on the probability that your case will be resolved in your favor and that the settlement or judgment will be large enough to warrant the risk.
  • You can usually get them fairly quickly: Depending on your specific situation, you may be able to get settlement funding within hours or days.
  • You’ll have more time to negotiate: When you’re pressed for cash, you may feel pressured into accepting the first settlement offer made. Settlement funding can relieve financial stress and allow you to negotiate a better deal.

Some additional considerations

Although critics claim that the settlement funding industry is largely unregulated, this is no longer the case. Settlement funding companies are not only regulated in many states, but they also follow industry best practices.

Having said, that, there are a couple of things to be aware of before you decide to get settlement funding. The first is that the total amount deducted from your settlement or judgment will include fees. The second is that lawsuits can drag on for years, so interest can add up quickly. Therefore, you should not be afraid to do some “comparison shopping” and find the company with the lowest rates. You should also know about the type of interest you’ll be liable for (simple or compound) and how it is calculated.

You should also be aware that settlement funding is a very broad term that includes different means for financial relief. These include purchase agreements, spring forward agreements and settlement loans.

Here’s what you should know about each.

Purchase  agreements

A purchase agreement assigns a portion of the pending proceeds from your legal claim plus any associated fees.

Spring forward  agreements

Although they aren’t well known to the general public, spring forward agreements are another means of financial relief. They provide for the sale of an asset (such as a portion of your settlement) for a certain price on a future date.

In other words, you – as a plaintiff in a personal injury case – can be a party to a contract allowing you to sell some or all of the proceeds  from your settlement for a specific amount straight away.  However, the deal isn’t officially wrapped up until the case is resolved. This means you don’t usually have to report the proceeds from the sale as income until that time.

Settlement loans

Depending on your state of residence, a settlement funding may come in the form of a settlement loan. Similar to purchase agreements, settlement loans allow you to have quick access to cash against the proceeds of your pending legal settlement. However, in this case, repayment is often required regardless of the outcome of your case.

In conclusion…

If you were injured in an accident or incident where someone else was at fault, your recovery should be your first priority. But if you have been unable to work because of your injuries, financial stress can complicate matters even further.

If you sued the person that caused the accident in which you were hurt, settlement funding may provide much-needed financial relief while your lawsuit is pending. If you qualify for one, you can use the money to pay your medical bills or living expenses. The amount you’ve borrowed will be deducted from any settlement or judgment you receive.

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.

Featured Image credit: gracinistudios / Pixabay