This is Part 2 of our four-part series about lawsuit funding and questions that we have frequently been asked over the many years that we have been providing this service. Yesterday, we talked about eligibility, cases that qualify, the primary benefits of lawsuit funding, credit issues, and alternative funding sources. To reiterate, the primary reasons that a plaintiff should seek out a lawsuit funding company are to save valuable assets and, strategically, to attempt to increase the settlement value of the case. Here are some additional frequently asked lawsuit funding questions:
6. Is this a lawsuit "loan"? No. Lawsuit funding is not a loan. We provide our service similar to the plaintiff’s attorney, we charge fees that are only paid if the case is won or settled and money is collected. If the plaintiff or the attorney loses the funded case, the entire obligation is excused. It is very much like the attorney, who advances case costs and significant time for his client, but does not get paid unless he wins. The correct term for what we do is we provide a "non-recourse cash advance" against the future outcome of your case. If you lose your case you owe nothing; if you win your case at expected levels, you are obligated to repay the advanced amount plus contractual profit. If you win or settle your case, but the result is dissapointing, we will often offer a results appropriate compromise. We want to see the plaintiff receive as much benefit from their litigation as possible.
7. I don’t understand. Why is this not a loan? What’s the difference? The difference is quite important, because the repayment on a loan, if your case is successful, is considerably less than the amount due for lawsuit funding if you win. The difference is, win or lose your case, a loan is absolutley repayable. You do not get excused from the obligation if you lose the case. A loan must be repaid, with interest, and you can lose valuable assets (home, car, etc.) to the bank, if you default. With lawsuit funding, your case is the only collateral and, if you lose, the debt is forgiven. It is substantially different; with lawsuit funding, the company is purchasing a passive interest in your settlement proceeds. You don’t owe the funding company a dime if you lose your case.
8. Do I have to pay up front costs, monthly fees, or anything "out-of-pocket"? NO!!! An ethical, professional lawsuit funding company provides you the cash you need and patiently awaits the outcome of your case. We do not charge any up-front fees or any kind. If you see "application fees", "processing fees", "undewriting fees" or any type of monthly fee, try another company. Fees should be based upon outcome and length of time to settlement or resolution, only. There should be easy-to-understand repayment requirments; they should be specific and due only if you win or settle your case.
9. What documents do we have to sign? What paperwork do you need? What is our attorney’s role? You are required to complete an application; at Lawsuit Financial, this is a simple, one-page form that you can complete on-line or over the phone. We will request a form, called an "Attorney Questionnaire", from your attorney. This is also a simple, one-page form that takes an attorney five minutes to complete. The attorney sends us the completed form with minimal case records (10-15 pages will usually suffice) and we will make a funding decision, usually within 24 hours of receipt of the attorney questionnaire and the records. We will provide you with a funding agreement that requires your signature and your attorney is required to acknowledge the agreement and agree to withhold money from your settlement to repay the advance, if the case is successful. That’s it! That is all that is required. We need your attorney’s cooperation; he has to complete the form, send the records and agree to the repayment procedures and send us a check when the case is done; he also is required to update us, very infrequently, by completing a fill-in-the-blank, half-page form.
10. How much money can I receive from a lawsuit funding company against my case? Lawsuit Financial recommends that you receive no more than 10% of the predicted value of the case. We also recommend that, if your attorney is telling you that he expects your case to resolve at a particular time, and you need funding to cover that period of time, that you take small advances over time, rather than a lump sum up-front. There are many reasons for that strategy, all designed to save you money. The minimum lawsuit cash advance is $250; the maximum is common sense, based on the projected value of your case, and your serious need for funding. This is not a service that should be used frivolously. You should only use lawsuit funding for a serious need, and only if you are inclined to settle your case for a lower-than-full-value offer to get the money you need.
More valuable lawsuit funding tips in our next installment; stay tuned…..
Attorney, certified civil mediator, and award-winning author of the Zachary Blake Betrayal Series—Mark Bello is also the CEO of Lawsuit Financial and the country’s leading expert in providing non-recourse lawsuit funding to plaintiffs involved in pending litigation. He is also a member of the State Bar of Michigan, a sustaining member of the Michigan Association for Justice, and a member of the American Association for Justice.