Lawsuit Funding – also known as litigation finance, settlement advances, lawsuit advances, pre settlement funding, post settlement funding, cash advance, etc. – is the process of providing cash advances to clients and attorneys based solely on the merits of a pending case or settlement.
Pre-Settlement Advances are cash advances on pending litigation. The funding company can only look to the lawsuit itself for repayment. It is not a loan. It is simply an assignment of a portion of the client or attorney’s interest in the anticipated recovery of the lawsuit. If there is no recovery, there is no re-payment. Is it ethical for attorneys to refer their clients for pre-settlement advances? Yes. As long as: 1) the referring attorney has no financial interest in the lawsuit funding company; 2) the referring attorney does not profit from the transaction; and 3) the lawsuit funding company is not involved in the litigation of the pending lawsuit. The benefits of referring clients to litigation finance companies are obvious – easing financial woes, providing immediate financial assistance during tough times, and being able to hold out for a better settlement.
The Pre-Settlement Advance process is simple. A completed two-page application is required to evaluate the lawsuit. The merits of the pending litigation will be evaluated and all questions/concerns regarding the lawsuit are directed to the attorney handling the lawsuit. A decision is made usually within 24-48 hours upon receiving the application and supporting documents. It is then left up to the client as to whether or not they wish to proceed. A contract will be forwarded directly to the attorney for review which will outline the transaction, the process, rates and fees, and how the client will receive their money. The attorney is simply asked to honor the lien of the funding company when settlement proceeds are able to be disbursed.
Post-Settlement Advances are cash advances on settled lawsuits. Why would a client or attorney need an advance on a case that has already settled? Because in most instances payment will be delayed due to court order approval, estate distribution protocol, medicare resolution, lien & judgment resolution, or just the insurance company dragging its feet, etc. Unlike pre-settlement advances, the post-settlement advance process is much more streamlined. After all, the case is settled, there is a release or settlement agreement outlining the settlement amount, the attorney fee and the client net share of the settlement. With that information, the lawsuit funding company can confirm the settlement, draft an agreement, and fund the transaction. The benefits? Providing clients immediate financial assistance for daily living expenses, and providing attorneys with immediate cash flow to keep their practice running.