What is Litigation Funding?
Litigation funding is a source of income or cash flow that provides financial support to plaintiffs. Plaintiffs in the midst of a pending legal settlement. Consumer legal funding involves pre-settlement funding, cash advances, and so on. Ever heard of ‘third party litigation’? This term makes sense, as funds received by a plaintiff come from a third party lender or funding firm.
This is because legally, an attorney cannot provide financial support to their client in any way. Essentially, this provides the plaintiff with the financial resources they need while their settlement or claim is ongoing. Funding is also available to lawyers as well, but for this article we are discussing how it applies to plaintiffs. If you are a plaintiff looking for more resources, here’s a beginner’s resource and guide.
In this article, we will cover how legal funding works and how funds are acquired.
How Does It Work?
Plaintiffs who find themselves in the midst of a legal claim or dispute could benefit from what legal funding offers. There are positives and negatives to legal funding options and we’ll be sure to walk through everything. Firstly, let’s talk about what it can help with and how it works.
Plaintiffs in need of cash have options available to them such as pre-settlement advances and pending lawsuit loans. A cash advance provides plaintiffs a certain amount of money to help with whatever financial situation they’re in. This advance goes toward for legal fees such as lawyer fees and court expenses. Mostly, it helps with everyday living expenses such as bills and groceries.
Plaintiffs dealing with a personal injury claim, they may not be able to afford the upfront court cost. Next, affording a lawyer. In a personal injury case, things can get even worse if the victim or plaintiff is out of work. This means they have no source of income. This is when getting a cash advance or loan is useful.
How to Get a legal loan or cash advance
The problem is that many people can’t afford an emergency cost of $500 or more upfront. Legal expenses are significantly pricey. Generally speaking, litigation funding like loans are less risky for lenders, which makes it even more beneficial for plaintiffs. They are helpful for those who are involve in personal injuries, auto accidents, work related injuries and so on. Before going any further, look at the Truth in Lending and Consumer Leasing Act, Fair Credit Billing Act, etc.
An interruption to your income means that it’s important to know how resources like this can help. Certain states work differently, but all of them have taken measures to protect the consumers. For example: from The Litigation Finance Journal: “The Nebraska state legislature has declared: ‘Nonrecourse civil litigation funding means a transaction in which a civil litigation funding company purchases and a consumer assigns the contingent right to receive an amount of the potential proceeds of the consumer’s legal claim to the civil litigation funding company out of the proceeds of any realized settlement, judgment, award, or verdict the consumer may receive in the legal claim’.
The bottom line is, with a strong case you will get funding no problem. A good lender or funding company will see the strength in your case. If it is a win-win that you have nothing to worry about. It is important to know that in the agreement with the lender, you will agree to pay them. You pay them when you when your settlement. The payment will include giving them a portion of your settlement. Explore more litigation funding resources at our blog!