How Does Lawsuit Funding Work?
– The Good and the Bad

Mar 17, 2010

One of the biggest services to hit the legal arena lately is lawsuit funding. In the past ten years, it has come out of obscurity to become something that most lawyers know about and that many approve of. How does lawsuit funding work? It works by helping plaintiffs get access to the money they may need while they’re lawsuit is pending. It sounds great, but as with most things, there are good things about lawsuit funding and things that are not so good about lawsuit funding.

The Cons

Before we go into the good things about lawsuit funding, we’ll discuss some of the things that are perceived as negative. To begin with, lawsuit funding is not something that everybody can take advantage of. There are only certain situations in which a company that advances money for lawsuit funding will do so for an individual. To start with, the person has to have a good chance of winning their case, because that is how the funder will be paid back. If your case does not have a good chance, you likely will not be able to get help fromlawsuit funding companies.
Another thing that could be construed as negative is that you are required to potentially pay back a high return on the advance. This is how the company makes enough money to stay afloat. The amount that you will be required to pay back will be clearly stated before you sign any paperwork, however, and it will come out of your settlement. It is not something that you will have to pay for out of your pocket up front.

The Pros

There are also many pros about lawsuit funding, the first being that you can get access to the funds that you need before you have received a settlement or before you’ve won a court case. As long as you have a lawyer and you fill out all of the required information, and also make sure your attorney gives any requested information to the funder, your case will be considered for funding. The funder does not look at your credit score or your employment history, only at the possibility of your case being one that will likely win or that will receive a good settlement offer.
Another pro about lawsuit funding is that it can help you to get a larger settlement. When you do not have access to funds, you may be much more likely to take any settlement offer that you get from the defendant. This amount could be much less than you are entitled to receive, but you may agree to it simply because you are in need of cash. Lawsuit funding can give you the money that you need now, allowing you to be able to hold out and to wait for the legal system to work, so that you can get the money that you are entitled to.