Litigation funding, also called legal financing, is a method used by litigants, and sometimes law firms, to cover the cost of legal expenses. Litigation funding is the means by which a third party entity provides the financial resources necessary to help litigants cover the cost of fees associated with a lawsuit. Since the cost of a lawsuit and its related expenses adds up quickly, having adequate funding like settlement loans available makes it easier to wait for fair and favorable results.
Why Is Lawsuit Funding Necessary?
For the average individual, embarking on a lawsuit can take a considerable amount of time, and it can cost a significant amount of money. Typically, a lawsuit causes financial loss from a variety of factors, including lost income from missed days at work, medical bills, transportation, and other out-of-pocket fees incurred by pursuing legal recourse. Sometimes, especially for people with limited time and financial resources to begin with, paying for a lawsuit becomes too expensive. Without the assistance of a legal funding company, they are left with the prospects of either ending the lawsuit early or going bankrupt. If a settlement will help cover the cost of medical bills or income due to missed work, having a lawsuit loan lets litigants consider various settlement offers. Financing that alleviates financial stress bides more time to negotiate with the opposing party.
How Do Litigation Funds Work?
Money that is given to litigants is distributed either by a legal defense fund or a legal financing company. Funds that are advanced by a legal financing company can be used for a variety of purposes, including personal use and litigation use. Money loaned from a legal defense fund, in contrast, is restricted to use only for purposes related to the lawsuit. In both cases, the third party advances money through a non-recourse cash loan. If the case does not settle in the litigant’s favor, he or she does not owe the lending company money in the end. In contrast, litigants are required to give a cut of proceeds to the lender if the case settles. The proceeds can be either a settlement or a judgment at trial.
How Does One Get Funding?
There are several simple steps to getting money for a lawsuit. First, you’ll have to apply for funding through a financing company. The company will start by reviewing your application, which then determines if you need to provide more information. If you get preliminary approval for legal funding, the lender will probably contact your attorney to discuss the specifics of the case, including its risks. Once the details of the case have been discussed, you’ll get a copy of the litigation finance agreement, which explains the terms and conditions of your settlement loans. Once that’s taken care of, you’ll get a funding advancement to cover the cost of your lawsuit. You can learn more about the legal process and legal funding here: https://www.nolo.com/.