Pre-settlement funding, sometimes called lawsuit funding or legal funding, can provide financial relief to plaintiffs waiting for their lawsuit to settle. It is not a loan but an advance against a potential settlement, meaning repayment only occurs if the plaintiff wins or settles the case. This funding can help cover essential expenses such as medical bills, rent, and living costs during a prolonged litigation process. Here, we’ll explain who qualifies for pre-settlement funding and explore the eligibility criteria in detail.
What is Pre-Settlement Funding?
Pre-settlement funding is a financial arrangement where plaintiffs receive a cash advance based on the expected outcome of their lawsuit. This type of funding is available for a variety of cases, including personal injury claims, employment disputes, and wrongful death lawsuits. It’s essential to understand that pre-settlement funding isn’t a loan; instead, it’s an advance against the future compensation of a claim. If the plaintiff does not win the case, they are generally not obligated to repay the advance.
Eligibility Requirements for Pre-Settlement Funding
Not everyone qualifies for pre-settlement funding. Since the funds are contingent on the outcome of the lawsuit, companies that provide this funding evaluate a few key factors to determine eligibility.
1. Having a Valid Legal Claim
The most crucial factor in qualifying for pre-settlement funding is having a valid, active lawsuit. Here’s what this entails:
Types of Claims that May Qualify
Pre-settlement funding is often available for specific types of cases, including:
– Personal Injury Claims: Car accidents, slip and fall cases, medical malpractice, and product liability claims are common types of personal injury cases eligible for pre-settlement funding.
– Employment Disputes: Wrongful termination, workplace discrimination, and harassment cases can often qualify.
– Civil Rights Violations: Cases involving discrimination, police brutality, or other civil rights abuses may be eligible.
– Product Liability Claims: Defective products that cause injury or damage to consumers.
– Wrongful Death Lawsuits: Families pursuing wrongful death claims often qualify for pre-settlement funding.
For a plaintiff to be eligible, the lawsuit must have a reasonable chance of success. Pre-settlement funding companies assess each case individually to determine its likelihood of yielding a positive outcome.
2. Plaintiff Representation by an Attorney
Another key eligibility criterion is that the plaintiff must be represented by a qualified attorney. Pre-settlement funding companies require attorney involvement to:
– Provide Legal Documentation: The attorney can submit case documents, evidence, and other details that the funding company needs to assess the lawsuit’s merit.
– Manage the Disbursement: Attorneys also help manage and coordinate the funds with the plaintiff and the funding company.
– Ensure Ethical Standards: Attorneys ensure that the funding process aligns with ethical standards and protects the plaintiff’s interests.
If a plaintiff is self-represented, they typically will not qualify for pre-settlement funding, as funding companies rely on the attorney’s expertise to gauge the case’s strength and handle legal communications.
3. The Strength of the Case
Pre-settlement funding companies carefully assess the strength of each case before providing an advance. This evaluation often includes:
– Evidence: Plaintiffs must present strong evidence supporting their claims. In personal injury cases, this could include medical records, accident reports, or witness statements.
– Liability: Clear liability is essential for a case to qualify. If the defendant’s responsibility for the injury or damages is evident, the case has a higher chance of securing funding.
– Estimated Settlement Amount: The potential settlement amount also influences eligibility. Cases with a higher expected payout are more likely to qualify, as the funding company can anticipate a return on investment when the case settles.
Funding companies typically collaborate with the plaintiff’s attorney to gauge the likelihood of a favorable outcome, and some may even hire third-party experts to evaluate complex cases.
4. Litigation Timeline
The timeline of a lawsuit can also affect a plaintiff’s eligibility for pre-settlement funding. Some funding companies are more likely to approve funding if the case is at an advanced stage, with a pending court date or settlement negotiations underway. This factor is relevant because:
– Closer to Settlement: A case nearing settlement is more likely to conclude soon, which provides greater certainty for the funding company regarding repayment.
– Lower Risk: Advanced-stage cases typically involve less risk, as the litigation process may have revealed more about the likelihood of winning.
While pre-settlement funding is still possible for early-stage cases, plaintiffs with cases that are closer to resolution may have an easier time securing funds.
Additional Considerations in Pre-Settlement Funding Eligibility
In addition to the primary eligibility criteria above, pre-settlement funding companies may consider other factors that influence the plaintiff’s likelihood of success.
Financial Need of the Plaintiff
Although not a strict eligibility requirement, some funding companies consider the plaintiff’s financial need when deciding to provide pre-settlement funding. Financial hardship often motivates plaintiffs to seek funding as they face challenges paying medical bills, household expenses, and other costs associated with their injury or litigation.
Jurisdiction and Legal Restrictions
Some states have specific laws governing pre-settlement funding, and these regulations can affect a plaintiff’s eligibility. For example:
– Cap on Funding Amounts: Certain jurisdictions may place a cap on the maximum funding amount a plaintiff can receive.
– Disclosure Requirements: In some states, plaintiffs must disclose pre-settlement funding agreements to the court or defendant.
– Prohibited Agreements: A few states have restrictions or prohibitions against pre-settlement funding, making it unavailable for residents.
It’s essential for plaintiffs and their attorneys to understand any legal restrictions in their jurisdiction to ensure they comply with applicable laws.
Attorney’s Cooperation and Participation
The plaintiff’s attorney plays an integral role in the pre-settlement funding process. If the attorney is unwilling or unable to cooperate with the funding company, the plaintiff may face obstacles in securing the funds. Attorneys are responsible for:
– Providing Case Information: The attorney must furnish necessary case documentation and details to the funding company.
– Managing Settlement Proceeds: After the case is resolved, the attorney distributes the settlement proceeds, ensuring the funding company is repaid.
How to Apply for Pre-Settlement Funding
If a plaintiff meets the eligibility criteria, they can apply for pre-settlement funding by contacting a reputable funding company. The application process typically involves:
1. Submitting Case Information: The plaintiff provides case details, often through their attorney, including evidence, accident reports, and medical bills.
2. Case Evaluation: The funding company reviews the case to determine the likelihood of success and estimated settlement amount.
3. Funding Approval: If the case meets the company’s criteria, the plaintiff receives a cash advance, usually within a few days.
4. Repayment Upon Settlement: The funding company is repaid from the settlement proceeds when the case resolves.
Conclusion: Is Pre-Settlement Funding Right for You?
Pre-settlement funding can be a valuable financial solution for plaintiffs facing extended litigation. To qualify, plaintiffs generally need a valid legal claim, legal representation, a strong case, and a clear liability. Additional factors, such as the litigation timeline, financial need, and jurisdictional laws, can also influence eligibility.
While pre-settlement funding may not be the best option for everyone, it provides a financial bridge for those who need immediate relief from the financial strain of a pending lawsuit. Consulting with an attorney and a reputable funding company can help plaintiffs make informed decisions about pursuing pre-settlement funding based on their specific circumstances.
