How Pre-Settlement Lawsuit Funding Works

							by: Afra AmirSanjari

An injured person contacts a company that offers pre-settlement lawsuit funding, sometimes at
the suggestion of an attorney. The finance company contacts the lawyer who is handling the
case, and obtains information about the case. Based upon that information provided, the loan
company estimates the value of the likely eventual settlement or verdict, and offers a cash
advance to the injured person based upon that estimate. The fee may be a flat fee, or a monthly
fee that accrues each month the loan is outstanding. When the case settles, or the defendant pays
after losing in court, the loan and associated fees are paid to the finance company.

These advances are offered as non-recourse funding, which means that an injured person has no
obligation to repay if the lawsuit is lost. Similarly, if the ultimate settlement or verdict is smaller
than anticipated, the amount that must be repaid never exceeds the amount of the injured person's
share of that verdict or settlement. For legal reasons, these advances are not characterized as
loans.

Amounts available vary significantly, depending upon the nature of the case and the company
involved. Many companies offer pre-settlement funding amounts between $500 and $25,000. A
few offer amounts up to $100,000. Fees also vary depending upon the company and the type of
case. Some companies will fix the fee for the advance up front. Others will charge a monthly fee
for each month between the time the funding is issued and when it is repaid, sometimes as high
as 15% per month.

This article was posted on November 20, 2004