Personal Injury Lawsuit Funding: Some Fundamental Concepts
It is widely known that personal injury lawsuits can take quite some time to be settled. Sometimes they even go on for many years altogether. This is because your lawyer may be engaged in protracted negotiations with the insurer or in the pre-trial discovery process. You could even be waiting for a trial date to be announced by the court. Regardless of the reason for the delay, life still needs to go on and bills still need to be paid even if you are incapacitated or have lost your job.
Even though you and your lawyer know that your case has serious merit and you could very well be heading for a hefty settlement, your financial crisis may force you to abandon the case. It is only possible for family and friends to support you to a certain extent and your chances of getting a loan from the bank can be very slim if you do not have a well-paying job or valuable collateral to offer. A lawsuit loan can be extremely helpful, if your case is dragging on and you are finding it difficult to pay the legal expenses or even for the bare minimum personal and family subsistence.
Is It Possible for Attorneys to Extend Loans?
Attorneys are prohibited by their professional ethics to extend loans to their clients as advances against expected settlements. This is because of the chances of a conflict of interest because clients may claim that their lawyers have accepted too less as settlements just because they wanted to get back their money faster.Or, clients may feel that the loan should not be repaid because the settlement was below their expectations. The lawyer may also decide to not to disburse the settlement money till you agree to the loan repayment and terms of the settlement. On a practical point, lawyers too would not want to become loan companies as they handle multiple clients at the same time.
What Is the Role of the Attorney in the Loan Process?
A pre-settlement loan is only possible when your attorney fully cooperates with the loan company. Your attorney has to provide all the details of the case to the loan company as without these the loan company will not be able to decide if the case merits an advance. There are many attorneys who are reluctant to divulge the details to lawsuit loan firms as they think it is a breach of privilege between the attorney and the client and the confidentiality of the documents is lost once they are given to third parties. Many lawyers are of the opinion that their primary duty of protecting the interest of the client cannot be executed properly once the case details are divulged. The loan company will also require your attorney to sign an agreement that will require him to ensure that their cash advance along with interest and fees are paid back before the client gets any payment. In a way, this means that the attorney has to put the interest of the loan company before his client’s.
What Is the Concept and Process of the Pre-Settlement Funding?
The concept behind the lawsuit loans is somewhat different from that of bank loans. Loan companies will only extend an advance if they are satisfied that the case has merits that are sufficient to act as a strong possibility of a large settlement sufficient to cover their exposure. The client is not required to either provide any collateral or to show proof of his creditworthiness. Once the loan company is satisfied with the strength of the case after discussing with your lawyer, it will usually send the client application to the insurance company as these loans are typically underwritten to protect the finances of the loan company. The insurance company will conduct additional research into the case and its precedents and advice the loan company on its findings. If the loan company still decides that the case is good for funding, they will contact you for the loan disbursal. Usually the maximum amount that is advanced is 10% of the expected settlement value. While it may not seem too much, it may just give the cushion to the client in dire straits. The most important part to remember is that the advance along with interest and fees is repayable only in case of a favorable settlement. If you do not win your case, you can simply walk away without any obligation.