Why would your attorney say no to a lawsuit loan?
Here are the top 5 times to say ‘NO’ that other funding companies may not tell you:
#5: When you have other means to get the funds they need, say no.
Lawsuit funding companies exist to serve those plaintiffs who have no other options. For plaintiffs who have exhausted all credit/loan options, have no health or other supplemental insurance to cover their expenses, or even relatives willing to help in their time of need, then non-recourse lawsuit funding can serve as their only lifeline. However, because plaintiff advances are non-recourse, they are one of the more expensive options. Why? Fees associated with advances are high to balance the cost of losses – allowing funding companies to keep their doors open. They fill a necessary place to give plaintiffs with no other options a fighting chance against deep pocketed defendants.
#4: When a case is at a very early stage and likely to persist for a substantial period of time, attorneys say no.
A plaintiff becomes eligible for lawsuit funding once a complaint has been filed. If you are confident that the case will resolve within a reasonable amount of time, then lawsuit funding may be a good option for your client. However if the case will take many years to decide, then it may be best to wait until the finish line is closer. Fees on a lawsuit advance accumulate monthly and the goal of all parties is to make sure the plaintiff recoups a substantial settlement or judgment amount after their attorney fees and liens have been paid.
#3: If you believe there is a very large settlement range, say no.
Even the shrewdest attorneys have been surprised at the outcome of a case. It comes with the territory Case Funding understands this nature of law practice. This is why non-recourse terms can be a very advantageous feature of the funding service. However, it is also possible to reach a settlement or judgment that is far from expectations and you and your client may be left with far less than hoped for. If there are factors beyond your reasonable control that you believe make evaluating the dollar amount of the case unclear, then it is better to hold off until there is a clear picture of the timing and outcome of the case.
#2: If the funding contract seems vague or contradictory, say no.
A good plaintiff advance contract should clearly state the terms and payoff requirements of the funding. Industry leading funders have had established ethical standards and rules that self-regulating funders have adhered to for years. These standards are publicized and developed most notably by the American Legal Finance Association (ALFA), a 31 member organization. Funders who follow best practices aim to present plaintiffs and their counsel the terms of the agreement in the plainest possible language with clear payoff scenarios. Your client’s contract should clearly show:
- All fees.
- An annualized percentage rate.
- A repayment schedule.
#1: If they attorney suspects you will use the funds on non-necessities, say no.
Lawsuit funding is a great resource available to plaintiffs to make certain the client can remain stabilized during the course of the case. Making mortgage or rent payments, and getting food on the table – these are really the essentials that lawsuit funding exists for. Unfortunately, not all plaintiffs are gifted with a propensity for managing their money. Putting a down payment on a non-essential second car, taking a vacation, or any other item that may increase your client’s monthly living expenses and/or is non-essential should be advised against.