Personal Injury Lawsuit Loans
If you have been involved in a personal injury lawsuit, chances are that the legal process can take a long time before you receive your settlement. It may take months or even years to reach a resolution for certain personal injury lawsuits. This can be particularly difficult when you are facing financial difficulties due to your injuries and medical bills.
In such situations, many people wonder if they can get an advance on their settlement check from their lawyers. The answer is no; lawyers cannot give you an advance on your settlement.
Attorneys must follow a strict code of ethics that prohibits them from giving loans to clients. This ensures no conflicts of interest and upholds the attorney-client relationship. However, they can help clients obtain pre-settlement loans from third-party lawsuit loan companies for financial support during the lawsuit.
Can Lawyers Provide Advances on Settlements?
No, they can not. Ethically, lawyers cannot provide advances on settlements. They can take cases on a contingency fee basis, but directly offering loans to clients is prohibited to avoid conflict of interest. For those in need, third-party lawsuit funding companies can be a potential source of financial aid during the settlement process.
Understanding Settlements
A settlement is a resolution made between conflicting parties without the need for a trial. In scenarios like personal injury cases, one party pays compensation (also known as recovery) to the other for their damages or losses, typically through an insurance company’s settlement check.
What Are Advances?
Advances, or pre-settlement funds, are loans given to plaintiffs (the injured party) during the ongoing lawsuit. They are not gifts but loans meant to help plaintiffs manage living costs and other expenses until the settlement is received. These advances need to be repaid once the case concludes or upon receipt of the settlement check.
Keep in mind that lawsuit loans aren’t given out by insurance companies or lawyers but by separate financial businesses. These businesses focus on giving cash advances to people in personal injury cases. Each case is closely looked at before a loan is given. These companies typically charge very high interest rates, which cause the costs of such advances to often be prohibitive.
What Can Attorneys Do?
Despite the need for advances, it’s improper and unethical for attorneys to give advances to their clients as it may lead to conflicts of interest. Instead, a pre-settlement funding company can provide clients a lawsuit loan for clients to have in essence a cash advance for their settlement funds. Clients can use this lawsuit loan for medical bills and living expenses while the lawsuit plays out. While the attorney can suggest a reliable provider for this cash advance, the final decision – including repayment terms – rests with the client.
Repayment terms, typically repayment of the loan plus fees or interest from the settlement, may differ based on the provider and the case specifics. While attorneys can’t provide advances, they can guide clients to suitable pre-settlement funding resources and help them understand the attached risks and responsibilities.
How To Get a Settlement Advance
Applying for Advance
To kick off the process of obtaining a settlement advance, you’ll need to apply to a company that provides pre-settlement funding. This involves giving them information about your case, such as what it’s about, the compensation you’re seeking, and when you expect to resolve it. They’ll carry out a thorough review, considering the strength of your case, the chances of a win, and the estimated worth of your settlement.
Approval and Funding
Once your application has been scrutinized, the lawsuit funding company will make a decision. If they approve your application, you’ll receive the cash advance. These funds can be used to cover living costs, medical expenses, and other recovery-related costs. The amount you receive depends on your projected settlement and the risk level the company is willing to take on. It’s crucial to note that the funds are not a loan but non-recourse—meaning, if you don’t win, you don’t repay.
Repayment After Settlement
When your case concludes and you receive compensation, you’ll need to repay the pre-settlement cash advance, plus interest.. This payment comes out of your settlement funds.
Benefits of Pre-Settlement Funding
Pre-settlement funding offers various advantages to plaintiffs who are awaiting their settlement. Here are the significant benefits:
Financial Support during Litigation: Pre-settlement funding provides plaintiffs with the necessary financial aid to manage their living expenses and medical bills during the lawsuit. It helps to alleviate financial stress and allows them to focus solely on their case.
Non-Recourse in Nature: One of the most significant advantages of pre-settlement funding is its non-recourse nature. If the plaintiff does not win the case, they are not obligated to repay the advance. However, it is for that reason that the loan company charges a very high interest rate. Usually these loans should be an avenue of last resort.
Risks and Downsides of Pre-Settlement Funding
High-Interest Rates and Fees: Pre-settlement funding can come with extremely high interest rates and fees, which could eat into the settlement amount. Over time, these costs can add up, making the total repayment amount significantly higher than the original advance.
Impact on Settlement Amount: Due to the high costs associated with pre-settlement loans, plaintiffs might find a large portion of their settlement proceeds going towards repaying the advance. This reduces the amount of money they have for their own needs and recovery.
Risk of an Untrustworthy Pre-Settlement Funding Company: While there are reputable pre-settlement funding companies, some may take advantage of plaintiffs in vulnerable situations. It’s crucial to thoroughly research and choose a trustworthy and established lawsuit loan company before agreeing to any terms or signing a contract.
Pre-settlement funding can be a helpful resource for plaintiffs in need of financial assistance during litigation. However, it’s essential to carefully consider the risks and downsides and work with reputable providers to ensure fair and transparent loan terms. It’s always recommended to consult with a lawyer before making any decisions regarding litigation funding.
We Are Here To Help With Your Personal Injury Case
At the law firm of Chaikin, Sherman, Cammarata, & Siegel P.C., we understand the financial strain that can come with a personal injury case. We are committed to helping our clients navigate the legal process. Don’t hesitate to reach out for help during this challenging time. We are here to fight for your rights and get you the justice and fair compensation you deserve. Contact us today for a free consultation.
