What Is Pre-Settlement Funding?

The consumer pre-settlement loan provides access to the recovery amount in the lawsuit before the ultimate closure of the case. This loan is known by many different names, such as lawsuit loan, litigation funding, pre-settlement funding or car accident loan as well.

Usually, the court trials or case settlements take longer time, even months and years in case of some complicated accident cases. And in most cases, the settlement amount is usually very high. In such situations, the pre-settlement funding company provides some portion of the expected pay-out in advance to the claimant. However, the claimant also needs to assign some portion of this recovery amount to the respective funding company which will be issued when the case is finally resolved.

Who can apply for a pre-settlement advance?

The funding agreement is not only influenced by the creditworthiness of the claimant. Rather, the funding agreements mainly focus on the strength of the case on behalf of the claimant. For the litigation funding agency, this transaction works more like an investment. Same as all investors, the agency needs to ensure that they are making a reasonable investment that could ultimately bring some profits. In order to investigate the case, the company hires a team of experts that could review the details and prepare estimates for the claimant.

While going through the case for estimating pre-settlement loan amount, the underwriters check below listed important factors:

Active status of litigation

The first thing that the litigation funding firm will need to check is that claimant has hired an attorney and they have an active case in the court. When the case is already filed, the agencies find it easier to rely on the investigation and assessment. Cases that are active in the court make these funders believe that the details are in the hand of some professional staff members, and the outcomes may be in favor of the claimant.

Type of case

All cases do not qualify for litigation loans. The most commonly accepted cases include personal injury or in which the claimant can expect some cash settlement from court. The list of such cases usually includes the destruction of property, slip and fall incidents, car accidents, and negligence. Very few litigation funding agencies provide loans for other cases like employment law cases, unsafe medical devices, and whistle-blower.

Settlement potential

This is another important aspect that underwriters need to investigate. After all, the settlement amount will decide how much profit the company can make out of this investment. Therefore, they are likely to check case files and estimate the settlement amount along with the case timeline. They just need to ensure that the respective case settlement will cover the fees of attorneys, travel, court reporters, and the cost of a lawsuit. The professionals offer pre-settlement amounts only after judging the potential of the respective case.

Experienced litigation funding providers know the best ways to deal with settlement-related cases. They can help claimants to manage ongoing expenses before the case is resolved in court. In this way, they make profits for their investments and yet the claimant receives funding to cover necessary expenses originated after the accident.

 

Citation

https://www.natlawreview.com/article/pre-settlement-lawsuit-funding-how-does-it-work