Legal Funding 101: What Plaintiffs Need to Know

When you're in the midst of a legal battle, especially after an accident or injury, the financial strain can become overwhelming. This is where legal funding comes in. Legal funding is designed to provide plaintiffs with the financial support they need to cover their expenses while they wait for their case to settle. Here’s what you need to know about legal funding.

What is Legal Funding?

Legal funding, also known as lawsuit funding or pre-settlement funding, is a financial option that helps plaintiffs obtain money in advance of a legal settlement or award. It’s not a loan—there are no monthly payments, and the amount is repaid only if the plaintiff wins the case.

Legal funding is typically used for personal injury cases, class action suits, and other types of litigation where the plaintiff might face a lengthy legal process before receiving compensation.

How Does Legal Funding Work?

Legal funding is a simple process, but it’s important to understand the steps involved. After contacting a legal funding provider, the plaintiff’s attorney provides basic information about the case, such as the type of case and the likelihood of success. Based on this information, the funding company assesses the risk and determines whether they will offer funding and the amount they’re willing to provide.

Types of Legal Funding

Legal funding comes in various forms, and it’s important for plaintiffs to choose the right type based on their situation. Here are the most common types:

1. Pre-Settlement Funding

Pre-settlement funding is the most common form of legal funding. As the name suggests, it provides financial support before the plaintiff’s case is settled. This can be a vital lifeline for those who are unable to work or are facing mounting medical bills while awaiting a settlement. The amount provided typically depends on the expected value of the case.

2. Post-Settlement Funding

Post-settlement funding, as opposed to pre-settlement funding, occurs after a case has been settled but before the plaintiff receives their full settlement check. This option is often used when a delay in payment is expected, and the plaintiff needs funds to cover immediate expenses.

3. Structured Settlements

In some cases, plaintiffs might agree to a structured settlement, where payments are made over a period of time. Legal funding can be used to advance a portion of the future settlement amount if the plaintiff needs funds more urgently.

Benefits of Legal Funding

Legal funding can provide plaintiffs with several advantages:

  • No Credit Check: Since the funds are repaid only if the case is successful, there’s no need for a credit check or collateral.

  • No Risk: Legal funding is non-recourse, meaning if you lose your case, you don’t owe anything. The funding company absorbs the loss.

  • Quick Access to Funds: Legal funding companies typically offer fast approval, ensuring you receive the funds when you need them most.

  • Reduced Stress: With legal funding, you can focus on your case without worrying about day-to-day expenses.

Conclusion

Legal funding can be a lifesaver for plaintiffs facing financial uncertainty during a legal battle. With no repayment unless the case is successful, it allows plaintiffs to focus on their case without the stress of mounting bills. However, it’s essential to understand the terms and evaluate if legal funding is the right choice for you. Be sure to discuss your options with your attorney before proceeding with legal funding.

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