Pre-settlement Funding Answers

By: Tony Perkins
Submitted: 2007-01-17 16:17:15
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Pre-settlement funding can be a confusing concept. Plus, most people have never been exposed to the concept of pre-settlement funding so the average person probably has many questions such as: What is a pre-settlement funding? Do I need pre-settlement funding? How do I get funding for my lawsuit? When I am approved for funding, do I have to pay back the money? If I am denied funding does it mean that I do not have a good case? These are all very good questions and are answered below.

What is pre-settlement funding?
Pre-settlement funding is not a “loan” at all but rather it is a cash advance based upon the merits of a lawsuit that provides a plaintiff with sufficient funding to reach the conclusion of the case when the plaintiff will receive his/her fair share of the settlement or verdict. Pre-settlement funding companies invest in the lawsuit itself as opposed to advancing money to the plaintiff in the form of a loan. Pre-settlement funding is not based on a plaintiff’s prior credit or bankruptcy status. Other terms used for this type of funding include: lawsuit loan, litigation finance, litigation loan, lawsuit funding, lawsuit finance, lawsuit cash advance, case loan, case cash advance, plaintiff cash advance, litigant funding, pre-settlement loan, pre-settlement lending, pre-settlement cash advance, etc.

Do I need pre-settlement funding?
Pre-settlement funding should not be a substitute for your settlement but rather a raft that helps you stay afloat while your attorney fights for you. Too many plaintiffs apply for pre-settlement funding with the belief that pre-settlement funding is simply a different way to get their settlement money. Assuming you win your case, the amount owed to the lending company varies greatly depending upon the length of time between the date of the advance and the date when you receive the settlement/verdict money. You should exhaust other means of funding first. Also, a good guideline to use is that pre-settlement funding companies generally advance up to 10% of the estimated settlement amount. There are some good internet sites that give more background on pre-settlement funding. Some good sources of information are The Funding Exchange (www.TheFundingExchange.com) and Expert Law (www.expertlaw.com).

How do I get funding for my lawsuit?
Pre-settlement funding companies have popped-up all over the country. Some tout their “low interest rates” or how they are the most lenient when it comes to approving pre-settlement funding. Many of these finance companies charge certain penalties and fees. These penalties and fees sometimes offset their “low interest rates” and many times end-up costing the plaintiff more of their settlement. A good option is The Funding Exchange (www.TheFundingExchange.com). The Funding Exchange is a network of pre-settlement funding sources. You complete one application on The Funding Exchange and your application is intelligently routed to the best pre-settlement funding companies for your specific situation.

When I am approved for funding, do I have to pay back the money?
Almost all pre-settlement funding companies give non-recourse funding to plaintiffs thus requiring the plaintiff to pay back the advance and fees/interest only upon a favorable decision in the case. If the case is lost then you can keep the cash advance with no obligation. If you win your case then part of the settlement amount will go towards repaying the cash advance plus interest and fees. The amount owed to a pre-settlement funding company increases the longer that your case takes to settle so keep that in mind.

If I am denied funding does it mean that I do not have a good case?
The simple answer is “no.” Being denied for funding does not mean that your case is not a good case or that you will actually win less money than you think. There are many different reasons why funding is denied. One reason is that the estimated settlement date is too soon. Litigation finance companies make money by accruing interest on their investment in your case. If your case is supposed to settle in 2 months then a litigation finance company will not make any money because the settlement date is too soon and therefore they may decline the funding request. Other reasons for denying funding include: attorney will not provide documentation, attorney will not sign contract, plaintiff demands too much money, etc.

Conclusion
As a plaintiff, you should understand pre-settlement funding and the process of securing funding before you apply. If your expectations are set correctly and you proceed with pre-settlement funding then you will find that it is a saving grace in the sometimes ugly world of litigation. If you apply for pre-settlement funding without a true understanding then you may be disappointed.

Article source: Expert Articles