Post-Settlement Funding Remains a Viable Tool to See You Through

Farmington Hills, MISo your lawsuit has settled. On the surface, this is good news. That means that your personal injury, and the inconvenience and suffering you have endured, has been vindicated. Your medical bills will now be paid, and so on. And then your attorney suggests something known as post-settlement funding.

What that is, and why you may need it, is because it very well may be a little too early to celebrate, just yet.

There are numerous reasons why your settlement can be held up, and here’s why...

It’s quite possible that there has been a medical lien or other forms of liens against the outcome of your lawsuit. What this means is that anyone who has a lien against your settlement award will be paid first, before you see any of the money. This can take a bit of time to sort out. There can be other delays, according to the laws of the state in which you live, that could delay release of your settlement money.

Here’s the problem: you need cash now. You have bills to pay. Perhaps you haven’t been able to work and are unable to pay your mortgage in a timely manner. You’re in danger of losing your house, or the rent is due There’s the car payment, and so on.

That’s where post-settlement funding comes in. In effect, post-settlement funding is a loan by a third party against your settlement money, with fees and interest rates slightly higher than that offered by a bank, but lower than that of a pre-settlement loan or lawsuit advance - something that you may have had to acquire while your case was percolating in the legal pipeline.

Pre-settlement legal funding - akin to post-settlement funding - is also based on the expectation of a successful settlement or court award. The unique aspect of a lawsuit advance is that there is no risk to you, the plaintiff, if your case is lost. The risk is entirely placed upon the funding source. If your case is lost and there is no settlement or court award in your favor, the lawsuit loan does not have to be paid back. It’s for this reason that fees and interest rates for pre-settlement funding are higher, because the funder assumes all risk and could wind up with nothing.

With post-settlement funding - as its name implies - the settlement is already assured. It’s just a matter of when the funds will be released to the plaintiff. Thus, fees are lower. That money, of course, has to be paid back.

It should be noted that pre-settlement and post-settlement funding assumes there are no other avenues of funding available to you. If you can borrow money from a family member at low-interest (or even better, no-interest), then go for it. A bank will also usually offer lower rates - that is, if you can find a bank to back you. A court case is not the kind of collateral the typical bank will find useful or necessary to qualify the plaintiff for a loan. Even if you already have a long-established relationship with a traditional bank, there are lines in the sand they will not cross.

Therefore, the pre- and-post-settlement funding industry has filled a void for those plaintiffs who lack financial resources from any other source. Shopping around can yield some savings in terms of fees and rates. Your attorney will also be in a position to advise you, and perhaps suggest some funders you can approach.

Yes, it is debt. But debt is often necessary and does not have to be necessarily “evil.” Debt, managed wisely, is what makes the world go ’round. It’s how businesses and corporations grow their enterprises, and it’s also how we purchase our homes. Who could afford to throw down $150,000 in cash on a house? In reality, we make our down payment, carry the mortgage over a period of years and eventually pay it off - all the while seeing the equity in our home grow. With a paid mortgage, you now control all the equity. Let’s say that home is now worth $250,000. That’s $250,000 more than you would have had, had you refused the idea of carrying debt to buy the home and decided to rent an apartment for the last 20 years.

$250,000 v. 0 - that’s what appropriate debt, managed wisely, can do for you.

If you are well on your way to owning your home, you don’t want to risk defaulting and a foreclosure while you wait for your settlement money to come through. A loan can be a tool to get you over the hump.

Post-settlement funding is simply one tool you have at your disposal to help protect your investments, your lifestyle and your livelihood, while you wait for your settlement - once approved - to be released.