If you need money to help make ends meet while your lawsuit is pending, settlement funding could help. Put in its simplest terms, settlement funding is one form of financing available to plaintiffs in some civil lawsuits. But unlike a traditional loan that can be secure anytime, this type of financial assistance is only available while a case is pending. This is because it is actually cash provided in anticipation of 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; and
- You need money to cover living expenses and/or medical costs while your case is pending.
Beyond that, it is only worthy of consideration for complainants in specific situations. Applying for this type of financial help may be warranted if you have exhausted all of your other options. A few alternatives to think about before applying for a lawsuit funding are asking family or friends for a short-term loan, using credit cards to cover costs, or even getting a conventional loan from the bank. As long as your credit cards or bank loan have reasonable interest rates, those may be more affordable options in the long run.
Here’s how settlement funding works
A provider may 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)
But how does the settlement funding company decide which applicants are qualified? To begin with, it requests certain information about you and your case. You must also provide the name of the attorney who is representing you in your personal injury case, and his or her contact information. Once it has this information, it will assess the merits of your case. As part of this evaluation, it will consult your attorney to get a better idea about the strength of the case and the chances for successful resolution. It will also estimate the potential case value.
Keep in mind that there is no such thing as 100 percent certainty when it comes to these assessments. There is always a chance that your lawyer won’t be able to negotiate an acceptable settlement or that you won’t win at trial. There’s also a chance that even if you are successful, you’ll get less compensation than expected. This means the lawsuit funding company is taking considerable risk when it provides funding. Because it is hedging its bets, a funding company will only approve applications from plaintiffs in cases with the best chances for success.
Because we base our decision on the merits of your case rather than your financial standing, your credit score is not a factor. This means you don’t have to wait while we contact the bureaus or worry that we will reject your application due to a poor credit score.
If you do get settlement funding, you’ll be charges or fees in addition to the amount funded to you. The good news, however, is that there are no upfront costs. And instead of making monthly payments as you would if you used a credit card or took out a loan to cover expenses, you don’t have any ongoing financial obligations while your case is pending. Once a settlement is reached, your attorney fees and related costs are deducted from that amount, followed by the amount of your settlement funding and fees.
Common uses for settlement funding proceeds
There is a saying in personal injury law that many cases are similar, but no two cases are exactly the same. No two accident victims are exactly the same, either. Each person has different legal case and financial needs. In most situations, 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. This not only puts stress on traffic accident victims, but also on their families. In these circumstances, the money from settlement funding can be used to pay medical bills and cover day-to-day costs.
What happens if the case isn’t resolved in my favor?
There is always a risk that things won’t work out for the best. 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 falls short of the estimated case value, 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. This agreement, which you must sign before cash is issued, specifies how fees and charges are calculated, the rate at which they accrue, and what will happen in either scenario detailed above.
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 and court costs.
Benefits of settlement funding
Cash strapped accident victims find this type of financial assistance appealing for several reasons. Here are just a few.
- You’ll get money for living expenses: Settlement funding is a financing mechanism that allows people injured in accidents through no fault of their own to access cash they need for day-to-day expenses and medical costs while their personal injury cases are pending.
- In most cases you don’t need good credit to get one: Unlike traditional lenders, providers don’t take your credit rating into account when determining your eligibility for funding. As we have already noted, this is because these providers base their decisions on the merits of each personal injury case rather than the applicant’s financial standing. Accordingly, there is no need to contact the credit bureaus and your application doesn’t hinge on your credit.
- You can usually get them fairly quickly: Because lawsuit funding companies do not generally need a great deal of financial information, the application approval process is quicker than those associated with personal loans or lines of credit. Depending on your specific situation, you may be able to get settlement funding within hours or days. Applicants may experience delays if the application is incomplete, the application is complete but the facts of the case require additional assessment, or the provider has trouble contacting the applicant’s lawyer.
- You’ll have more time to negotiate: It isn’t right, but it is an established fact. Insurance companies expect desperate accident victims in pending lawsuits to accept early settlement offers, even those for far less than the case is worth. This is largely because it can take months, and sometimes even years to resolve a personal injury case. A litigant facing financial hardship in this situation will often pressure his or her attorney to negotiate a quick settlement, even if it is not in his or her best interest. Getting a consumer legal funding can relieve financial stress and allow your lawyer 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. Even more importantly they provide an important service to meet an identified need. For many people, it truly is the best solution.
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 certain charges. The second is that lawsuits can drag on for years, so charges 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 charges you’ll be liable for 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.
A purchase agreement assigns a portion of the potential proceeds from your pending legal claim in exchange for the cash funded to you.
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 complainant 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.
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.
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. Life can become unbearable, not only for you, but for your entire family.
Fortunately, there is a solution. 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 cover routine costs. The amount you’ve borrowed will be deducted from any settlement or judgment you receive.
Now that you know the truth about settlement funding, why not discuss it with your lawyer? He or she can easily let you know if it is the best option for you. Better yet, call us or fill out an application online. Our experts are available to provide any support you may need.
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.