Lawsuits are intended to provide compensation for personal injuries and other injustices. Filing a lawsuit can eventually get you the financial compensation you deserve, but the process is very lengthy and can get expensive. Expenses and medical bills can quickly pile up, but it could take well over a year before you finally receive your settlement. If you’re in this position, you may wonder if you can take out a loan against your pending lawsuit proceeds to cover your current expenses.
Luckily, there are solutions that can help you cover these personal expenses. Legal funding companies offer a number of options to help you through this challenging situation, like pre-settlement funding or lawsuit loans, depending on the type of legal claim you have and your state of residence. Here’s what you need to know about this financial option.
Why File a Personal Injury Lawsuit?
In the United States, millions of people are injured in accidents each year. In some cases, the accidents are their fault. In other cases, someone else caused the accident. You can file a personal injury lawsuit if you were hurt in a car accident, a slip and fall accident, or any other type of accident where someone else was to blame. However, you must do so within the legal time limit, called a statute of limitations.
To win the case or reach a favorable settlement, there must be sufficient evidence that: the other party was legally obligated not to hurt anyone else; that he or she breached this duty by being careless or reckless; that this behavior caused or contributed to the accident; and that your injuries stemmed from the accident in question. With enough proof of all of these things, a judge or jury will order the defendant to pay a specified amount to compensate you for your injuries. Alternatively, your lawyer will be able to negotiate a fair settlement with the responsible party’s insurance company.
The bottom line is that serious injuries are financially and personally devastating. Furthermore, they can change not only the course of your entire life, but your family’s lives as well. While a lawsuit cannot undo this traumatic event, a financial settlement can make life a little easier in the aftermath. You can get compensation to cover hospital bills, the cost of prescription medication, ongoing medical treatment, and rehabilitation costs.
Many people who have strong legal claims choose not to take them because they are overwhelmed by the legal system. You shouldn’t let these things scare you away from getting the compensation you deserve. If you think you may have a case, it’s worth meeting with a lawyer just to get their take on the situation. Most lawyers are happy to offer you a consultation first before committing to their services. Be sure to document the injury extensively to increase the chances of your case being successful.
How does Pre-settlement Funding Work?
Pre-settlement funding is designed to assist with routine expenses and medical bills during a lawsuit. In some states, pre-settlement funding companies are licensed lenders and the pre-settlement funding is often referred to as a lawsuit loan or advance. In most states, pre-settlement fundings companies are not regulated as lenders and offer to purchase a portion of the potential proceeds from your pending legal claim. However, pre-settlement funding, even when provided in the form of a loan, works differently than a traditional loan. A conventional lender, such as a bank or credit union, does a thorough assessment of an applicant’s financial standing. A credit check is an integral part of this process, and a poor credit score can prevent an applicant from obtaining a loan or line of credit. Other factors, such as current employment and employment history may also be evaluated, adding to the application processing time.
In comparison, applying for pre-settlement funding is much easier. You can usually apply online or over the phone if you are the plaintiff with a pending legal claim and you have hired an attorney. At this stage, most funding companies need basic information about you, your case and contact information for your personal injury lawyer.
Because the funding company bases approval on the strength of your case rather than your financial standing, your credit score is not a factor in the approval process. Instead, the funding company will talk to your lawyer to learn more about the details of your case. It will then decide if you qualify for funding and if so, how much money to provide based on the case value and the chances of a successful outcome. Depending on the type of funding and the amount, a funding company may run a credit report just to confirm that there aren’t any other liens that would impact your settlement proceeds. For the funding company, this is all about risk management. Is it a worthwhile business decision to issue the cash or pre-settlement funding based on your legal circumstances? In many situations, the answer is “no,” because funding companies only take on the strongest cases.
With approval, however, you can use that money to pay medical bills and almost any other expenses that have come up as a result of the injury. For example, many people who get seriously injured are unable to work, so you may use the cash as wage replacement for a period of time until you can start making money again. The only expense you cannot use the funding for are any legal costs and expenses related to your pending legal claim. The amount you can get for pre-settlement or legal funding varies based on your specific case.
Is Pre-settlement Funding the Right Option for Me?
Pre-settlement funding is a great solution for some plaintiffs in ongoing personal injury litigation, but it is not for everyone. It may not be the answer for you if you have access to other funding sources. If you think you can qualify for a standard personal loan or a line of credit, approaching a traditional lender may be worthwhile. By borrowing money this way, you may get better interest rates, making a loan or line of credit a more affordable option in the long run. If you own your house, you may also want to consider tapping into your home equity.
Barring all of that, you may want to think about talking to family or friends for short-term financial assistance. While you are at it, you may also want to check with your insurance carrier to see if your policy can cover some of your costs. Experts urge accident victims involved in personal injury litigation to consider these options before applying for pre-settlement funding due to the potential cost of the legal funding or lawsuit loan. If you get pre-settlement funding, you are liable not only for the amount funded, but also for any applicable fees. Because it can take a long time to resolve a personal injury case, fees can add up quickly.
If you think about it, this is a question of personal risk management for you. Is it worth it to you to get the money you need in the short term to have a substantial amount deducted from your judgment or settlement in the long run? Your answer to this important question will depend not only on your legal and financial situation, but also on the provisions in your funding agreement. Even so, there are many cases in which pre-settlement funding can be very helpful. If you’ve run out of money and need additional funding to get you through during the lawsuit, it’s worth looking into with the guidance of your lawyer. Pre-settlement funding may be what you need to get you through this very trying time.
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This application is free, and if you don’t win, you don't pay!
If you do not yet have an attorney, QFN can help. Please submit this form or call us toll free at (888) 222-5556