Pre-Settlement Funding Helps Plaintiffs with Financial Stress


. By Heidi Turner

Often when people think of filing a lawsuit, they anticipate the money they could win at the end of their trial, but do not consider that costs can add up while they wait for their lawsuit to conclude. Some plaintiffs are turning to pre-settlement funding to help when finances are stretched before they receive their award or settlement. Pre-settlement legal funding can provide a much-needed cash infusion, to cover costs and expenses incurred as a result of an injury. Although there are some concerns about pre-settlement legal funding - such as the interest rate - for many plaintiffs, the money is a lifeline.

The problem for plaintiffs injured or harmed by someone else’s negligence is that their costs do not wait until their lawsuit is over. The plaintiff may not be able to work, but still has to cover regular expenses such as a mortgage, car payments and cost of living. Now consider that on top of that, a person might also have huge medical bills, including hospital stays, physiotherapy and medication. That can add thousands of dollars to a monthly bill.

And in some cases, lawsuits can drag on for years. Defendants can file appeal after appeal to delay paying out an award. Even in cases where a settlement is reached, it can be years between the time the plaintiff is injured and the time the money is received. By that time, the plaintiff could face foreclosure on his or her home, or could be put in a situation where vital medical care is not obtained because the plaintiff cannot afford it.

Pre-settlement funding provides plaintiffs with an infusion of cash based on the perceived likelihood that the plaintiff will win his or her case. Money is not paid back until an award or settlement has been reached and the loan is considered non-recourse funding, meaning the plaintiff only pays it back if he or she receives an award or settlement.

Although pre-settlement lawsuit funding can be a boon to those who need it, there are concerns that the interest on such loans can be high, and plaintiffs, eager for the money now, may not consider what a large chunk it will take out of their settlement or award when the time comes to pay it back. Some critics caution that loans should be taken out for the very minimum necessary - only as much as is necessary to cover important expenses, not vacations or luxury purchases - and they should only be used as a last resort.

But for some plaintiffs who need the money to cover their living costs while they wait for their lawsuit to conclude, pre-settlement funding can make a huge difference.


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