For most people legal financing is a new term. With the general population who have never been involved in a personal injury lawsuit, its common they have no idea what legal financing is, or how it works. Legal Finance is a relatively new field of funding in the financial services arena that is only a few years old.
If a lawyer has a case reviewed that he/she determines is a strong case, the lawyer will likely take on the case and file the lawsuit on behalf of the plaintiff. The plaintiff then waits as the case makes its way through the legal system, waiting for a final case settlement. During this time the plaintiff can be stretched for cash and feel the mounting pressures of their financial responsibilities. Legal financing can provide funding to plaintiffs who need money prior the settlement in their case.
Legal financing firms specialize in funding cases that have a strong chance of winning in court. Once an application is made by the plaintiff, and the case is reviewed by the legal finance firm, the funding may well be approved. In actuality, the funding firm is buying a portion of the reward at the time of settlement. No funds are paid prior the final settlement in the case. In the event the case is lost; funders have no recourse – which means the plaintiff has no commitment to return any of the funds they were given by the firm.
Many people who have sustained an injury – whether it’s a car accident or slip and fall, or other personal injury, cannot work due to their injury and condition. Their lawyers can fund items directly related to the case but cannot directly give personal advances to their clients in most states because doing so would be considered a conflict of interest.
Funding decisions are made rather quickly once the case is reviewed by the legal financing company. The plaintiffs are advanced money that allows them to pay their bills and survive until a settlement is reached. For most people in this situation, going up against an insurance company means deep pockets and lots of patience.
One important point to note is that these funds are not loans. A normal bank loan normally has a clear and defined regular repayment schedule, usually payments are required monthly. Legal financing is more like a “cash advance” as no funds are required to be paid back until the case finally settles.