Can You Get an Advance on Your Lawsuit?

What Lawsuit Advances Entail

A lawsuit advance, also known as pre-settlement funding or legal funding, provides individuals in ongoing lawsuits immediate cash. This allows claimants to cover living or medical costs while their legal case proceeds. Unlike traditional lending, these advances are not contingent on credit score or employment history. Instead, funding rests on the perceived strength and potential value of the legal claim.

Lawsuit advances represent a non-recourse cash advance. Repayment depends solely on successful resolution of the lawsuit through settlement or favorable judgment. If the plaintiff’s case is unsuccessful, the funding company assumes financial risk, and the individual is generally not obligated to repay. This structure provides a financial lifeline, enabling plaintiffs to avoid premature or unfavorable settlements driven by immediate financial pressure.

Determining Eligibility for an Advance

Eligibility for a lawsuit advance hinges on the strength and potential value of the legal claim, not the applicant’s personal financial standing or credit history. Funding companies assess the likelihood of a favorable outcome and the estimated settlement amount. This evaluation involves detailed review of case specifics and supporting documentation.

Many personal injury cases qualify for pre-settlement funding, including car accidents, slip and falls, medical malpractice, and product liability. Other qualifying cases might involve nursing home abuse, dog bites, or certain employment law disputes and civil rights violations. The common thread is injury or significant damage from another party’s negligence or wrongful action, leading to potential for substantial compensation.

Funders analyze factors for eligibility and the amount they advance. These include clarity of liability, meaning how clear defendant responsibility is. They also consider damages incurred, such as medical bills, lost wages, and pain and suffering, and the availability of defendant’s insurance coverage.

A qualified attorney is a requirement for obtaining a lawsuit advance. Attorneys provide essential case details, including legal strategy and an estimated settlement amount, which helps assess risk and potential return. They also ensure the claim has merit and is professionally handled, increasing the likelihood of a successful outcome.

Applicants must provide specific information and documentation for assessment. This often includes police or incident reports for accidents, detailed medical records of injuries and treatment, and insurance policy information. The attorney’s case assessment, including demand letters or filed complaints, is crucial for review.

Applying for Lawsuit Funding

Lawsuit funding applications begin after eligibility criteria are understood and necessary information gathered. The initial step involves contacting a funding company, often by filling out an inquiry form online or over the phone. This form asks for basic details about the lawsuit and the applicant’s attorney.

Upon initial inquiry, the funding company contacts the applicant’s attorney directly. This communication is crucial as the attorney provides detailed case information and supporting documents. This may include accident reports, medical records, and legal filings that substantiate the claim.

The review process involves a thorough evaluation of provided documents and an assessment of the case’s merits and potential value. Underwriters analyze the strength of the evidence, clarity of liability, estimated damages, and likelihood of a successful resolution. This assessment helps determine the advance amount.

If approved after review, the funding company presents a funding agreement to the applicant and their attorney. This agreement outlines the advance amount, fees, and repayment terms. Both must review and sign this agreement before funds are disbursed.

After signing, funds are typically disbursed rapidly, often within 24 to 48 hours. Funds are usually sent directly to the applicant via bank transfer or other agreed-upon methods. This swift disbursement allows plaintiffs to address immediate financial needs while their lawsuit progresses.

Understanding Repayment and Costs

Repayment of a lawsuit advance is uniquely structured, occurring only if the lawsuit is successfully concluded through settlement or favorable judgment. This non-recourse feature means if the case is lost, the plaintiff generally owes nothing to the funding company. This arrangement shifts financial risk to the funding provider.

Total repayment includes the initial cash advance provided to the plaintiff, plus associated fees and charges. These fees are typically referred to as funding or administrative fees, not interest, to distinguish them from traditional loans. Fee structures vary, often involving a simple or compounded rate that accrues until the case is resolved.

Some funding companies charge a fixed fee that increases at set intervals, such as every six months, while others apply a monthly compounded rate. These rates can be substantial, reflecting the high risk assumed by the funder. Plaintiffs should understand how these fees accumulate, as they can significantly impact the final amount owed from the settlement.

When a settlement or judgment is secured, the plaintiff’s attorney typically handles repayment. The attorney receives settlement proceeds and repays the funding company directly from these, before distributing remaining funds to the client. This ensures the advance and all accrued fees are settled as per the funding agreement.

The attorney ensures the funding company receives its agreed-upon share, and remaining funds are disbursed to the client after deducting legal and other case expenses. This process minimizes direct financial interaction between the plaintiff and the funding company.