Pre-settlement funding is a lawsuit settlement funding method, wherein a person gets funding in the form of a non-recourse loan from a pre-settlement funding company on the basis of the pending compensation case. If the settlement amount is lesser than the anticipated amount, the amount to be repaid by the injured person never exceeds the verdict amount. This funding process involves financing an on-going litigation instead of paying legal fees succeeding the settlement. The risk is quite high in a pre-settlement funding and therefore the funding companies expect a higher return. After the case is settled, the loan and the fees are paid to the funding company.
A plaintiff who has suffered injury looks for personal injury loans from a pre-settlement funding company. The funding company contacts the attorney and obtains detailed information relating to the case. The funding company estimates the value of the settlement amount on the basis of information received from the attorney and thereafter offers advances to the injured person. The funding companies generally do not provide funds to the plaintiffs whose cases are not strong enough justifying substantial awards. The funding from the pre-settlement funding is not termed as “loans” but “investments” or “cash advances”. Every state does not permit pre-settlement funding.
Pre-settlement versus post-settlement funding
When a person meets with an accident due to the fault of some other person he files a lawsuit for getting a fair compensation. The settlement of a lawsuit takes time. But, at the same time he has to undergo treatment, has to pay the medical bills, hospitalization charges, family expenses, and other regular bills. Here, there is one option opened for the injured person, legal funding. There are two types of legal funding i.e. pre-settlement funding and post-settlement funding. In a pre-settlement funding, the plaintiff gets cash advances before the settlement of the lawsuit. If the case is lost, there is no obligation for the plaintiff to repay the amount.
Post-settlement is not so common but it is also an available option. Even after winning the case, it takes months and sometimes years to receive the actual amount. The reasons for the delay are accounted the court approvals, administrative delays, and slow payment to the defendants. The risk involved with a pre-settlement funding is quite high, and therefore the rates are high. But with post-settlement funding, the investment risk for the funding company is less as the case is already decided. The rates are more reasonable in comparison to the pre-settlement rates. Pre-settlement funding focuses majorly on the personal injury cases but post-settlement cases fund a large variety of lawsuits.
A much-needed help
A lawsuit loan or a pre-settlement loan can give the much need relief to the injured person if he is not able to cover the medical bills, living expenses, mortgage payments, or car loan payments. The settlement or the award takes a lot of time but meanwhile, you need to pay the bills and further taking a lawsuit loan may give you more to get a fair amount of the award. If the lawsuit loan or personal injury loans relieves you from the financial stress it gives more time to the plaintiff and the attorney to negotiate the amount with the defendant.