Litigation Financing and How Doing It Wrong Can Be Highly Detrimental to the Client’s Case

There may come a time when everyone needs a loan. You may require a loan when you have to pay your medical bills off from an accident. Those bills may come in quicker than you think they will – such as immediately! You will not be physically or mentally prepared for how quickly those bills start to come in, but they will.

Why Is Litigation Financing Necessary for the Client?

A client may need and require litigation financing if the bills from the lawsuit start to hit the client hard, before the money gets released to the client in the form of a settlement package. For example, if the medical bills come in quickly as you are recovering, you will not get a chance to pay for these bills out of your own pocket.

Some can make an argument, why would you pay for medical bills from an accident that is not your fault? When you have had an accident, and are looking to initiate a lawsuit to get back the recovery compensation that you need and require to be made “whole again,” you need money. The problem is though, that lawsuits take time, resources and attention. They also need to have a knowledgeable legal team at the helm.

Why Do Lawsuits Take So Long to Settle Anyway?

There are many different reasons that a lawsuit takes a long time to settle. Sometimes it is because of the evidence and fact gathering for litigating the claim. There can be documents, medical bills, ongoing treatments, and other issues that can be in the mix for the client who is initiating a lawsuit.

Other times, there can be a big insurance company that is making it difficult to settle the claim out. Either way, lawsuits take time to settle and do not settle out overnight. In fact, if a lawsuit settles too quickly, it might mean that the client is actually getting cheated by the big insurance company in the process. These things take time, and patience is a virtue when waiting to settle out a lawsuit.

But even under the best of circumstances, a legal recovery compensation settlement is not going to come on your doorstep in a few days, weeks, or even sometimes months. You will need to wait for this result. In the meantime, you may need a litigation loan to get through a rough patch, to pay your bills, and to stay out of collections until your case is settled.

Third-Party Litigation Finance Is Detrimental to the Client’s Case

Third-party litigation finance companies do work with some law firms to fund the financing loan on a case. These third-party companies are not related to the law firm, and are independent of the law firm that would be handling your case. The financing companies have a specific formula that they use to determine how they will finance the case. All of these financing companies have their own criteria that they look for, but it might include:

• Claim size
• Expected settlement
• Seriousness of personal injuries
• Low claims costs
• Merits of the case
• Subject matter of the case
• Financial strength of the entity being sued or litigated against
• Arbitration expectations for the case
• Percent of recovery bound to go to the third-party litigation financial company

If you need a client litigation loan, you need to give us a call. When we give you a litigation or pre-settlement loan, you will pay back an interest rate determined between a low percentage, such as typically between 2% and 10% interest to be applied annually to the full amount of the loan. We are not in the business of farming out our financing to another company, who will charge fees on top of fees, all to get more from you in the process!

Some Firms Use Third-Party Companies to Finance Litigation Case Costs

It is common that a firm will use a third-party company to finance the litigation costs of a case. These expenses include the deposition fees, expert fees, and any litigation costs and expenses associated with the case.

In these cases, the law firm is borrowing money from a lending company. This will occur at very high interest rates, which use the money to fund the client’s case. Unfortunately, in the end, the client needs to pay this back from the settlement recovery funds. This will then leave the client with a significantly reduced net or total recovery settlement amount.