Lawsuits are expensive and can take a long time to resolve. Even if you have a strong case, you might have to wait years before you reach a settlement or win a court judgment. In the meantime, your bills pile up. You may have fixed expenses such as a mortgage, insurance, and school tuition. If you were injured, then you might have medical expenses but not be able to work. This is where legal funding comes in. Legal funding is not a loan. It’s a non-recourse advance on a potential settlement or trial award. You can use the use the money for any expenses or costs you have except for the legal costs of your case. If you win or settle, you must pay the legal funding company back the funded amount, plus interest and fees. If you lose, you owe nothing since legal funding is non-recourse and risk-free. They will ultimately take part in your court awarded judgment or settlement money, as that is where legal funding companies get repaid.
Part 1 of 2:Finding Legal Funding
1. Decide which kind of funding you need
Decide which kind of funding you need. There are two primary types of legal funding. They differ slightly, so you should understand which type of funding you are seeking:
Direct plaintiff funding. You already have a lawyer and have filed a lawsuit. The lender will give you a cash advance so that you can pay your living expenses. Cash advances typically range from $2,000-15,000 but can be any amount. If you win your case, you repay the amount borrowed, plus interest.
Litigation Cost Funding. You might need money to pay for the costs of a lawsuit, such as expert witnesses, court reporters, and investigators. Sometimes, you might even need money to pay the lawyer’s fees. The lender sends a check to your attorney periodically. As the plaintiff in the lawsuit, you agree to pay back the amount advanced plus either interest or a percentage of the amount you win.
2. Talk with your lawyer
Talk with your lawyer. Your lawyer’s cooperation is key to obtaining legal funding. They will need to talk to the legal funding company and answer questions about the case. Your lawyer will also have to complete some paperwork before you can obtain funding.
3. Identify companies that fund lawsuits
Identify companies that fund lawsuits. Legal funding has grown over the past couple of decades, so there should be no shortage of companies you can contact. If you don’t know where to start, perform a general Internet search. Type “legal funding” and then your type of lawsuit, e.g., “personal injury.”
Some legal funding companies specialize only in certain kinds of injuries. For example, they may only fund civil rights lawsuits or only personal injury lawsuits.
Some companies also fund lawsuits in only certain states. Check whether they operate in your state.
Also check whether the company funds “pre-settlement” or “post-settlement.” Some companies will only advance you money if you already have a settlement in place. These are post-settlement companies.
4. Research companies
Research companies. Once you have a list of companies, you should perform in-depth research. You don’t want to sign up with a shady company or a scammer. Instead, you should research the company’s reputation.
Search online. Type in the company’s name and “complaints.” Look around to see if anyone complains of being ripped off.
Perform a reverse look up of public records online to find out if the company has been sued before.
Check the Better Business Bureau. Look in the city where the company has its headquarters. Pay attention to any complains about the company.
Take time to research interest rates at each company so you can compare them.
5. Analyze the strength of your case
Analyze the strength of your case. Not everyone with a lawsuit qualifies for legal funding. Instead, the company will analyze the strength of your case. They will only advance funds if they think you will get compensated for your injuries or damages.
Many companies have experienced lawyers on staff who can assess the strength of the case. You should also talk with your lawyer about whether your case is strong enough to approach legal funding companies.
6. Consider whether you really want funding
Consider whether you really want funding. If your lawyer is representing you on contingency, then they will take a cut of your settlement or court judgment. Read your fee agreement or engagement letter to see how much. Realize that the settlement funding company will take another percentage.
For example, you might win a $200,000 settlement. Your lawyer could take 40% of that, leaving you with $120,000.
A legal funding company might fund 5-10% of the claim. This means you could pay another $20,000 plus interest, which will reduce your take-home amount to $100,000 or less.
Consider whether you have other options. For example, friends or family might let you move in with them or give you an interest-free loan which you can pay back after you receive your settlement.
Part 2 of 2:Applying for Funding
1. Ask questions
Ask questions. Before applying to a legal funding company, you should talk to someone and ask questions. You want to understand the agreement you are entering. For example, you may want to ask the following:
Will you be charged a start-up fee? Are there other hidden fees?
What percentage of your lawsuit will they fund? How large of a cash advance can you get?
How much interest will you be charged? Generally, consumers are charged an annual interest rate of 51-156%. This can add up quickly.
When do you have to pay the legal funding company? Immediately after receiving your settlement? Do you have to make monthly interest payments?
Does the company provide any additional services. For litigation cost funding, the company may provide a case assessment.
Apply. Contact the legal funding company and ask how to apply. Some companies let you apply online. Generally, you will be asked for the following information:
personal information (name, contact info, etc.)
state where your case is filed
type of case (personal injury, civil rights, etc.)
name of your lawyer
lawyer’s contact information
3. Sign a contract
Sign a contract. Make sure to thoroughly read the contract before signing. Don’t sign unless you agree with everything in it. Show the contract to your attorney as well. In some states, such as Maine, the law will list requirements that must be in a contract for legal funding.
Check how the company is paying you. You might receive a lump sum payment or monthly installments.
For direct plaintiff funding, your lawyer may also have to sign an acknowledgement form or other document. To make things easy, you can meet and sign them together.
4. Receive your money
Receive your money. You should receive your money soon after signing the contract. Depending on the legal funding company, you might receive your money in one of the following ways:
transfer by Western Union
wire directly into your bank account