Rapid Legal Finance

Of all the people requesting cash advances on their lawsuits, motor vehicle accident victims are the most common.

Typically the victim has been injured and therefore cannot work, so from the start, they are losing income. Add this loss of wages to medical bills that may not be readily covered by insurance and you have a financial strain on the victim. How serious this financial strain is depends in part on how long the victim’s recovery period is. If he/she has had surgery, it could be months. This can lead to unpaid bills (utilities turned off, car reposessed, house foreclosed, etc.).

To solve this financial strain, the victim may start using his/her own credit cards. Soon these bills come in, though, and they usually are not set up for deferred payments. Next he/she may turn to family and friends for some money. Nowadays many of us are strained by the overall economic climate so that is not typically a viable option.

For a victim of a motor vehicle accident, a cash advance on his/her lawsuit is an option that may alleviate a lot of stress. Bills can be paid and the victim can buy some time until he/she gets back to work. As an added benefit, it can afford the victim’s attorney to take the time to get the full value of the case, instead of accepting a lowball offer due to the victim’s financial desperation.

To qualify for a cash advance on a lawsuit, a person must have:

a lawsuit in progress. A plaintiff must have an attorney on retainer who is working on his behalf.

Once that qualification is met, there are a few things that are needed in order to evaluate the case. They are:

1. Complaint. This summarizes your grievance and is prepared by the attorney handling the case.
2. Evidence damages sustained by the plaintiff. For a motor vehicle accident, this would include medical records that depict the injury. If the plaintiff had surgery, the surgical reports should be included.
3. Evidence of liability of the defendant. This would include any documentation that showed the defendant is the one at fault and should therefore be the one taking responsibility. For a slip-and-fall case, this may include an accident report, photos of the accident site, a witness that saw the accident, etc.
4. Proof of the defendant’s ability to pay (insurance). A insurance policy declaration page usually is enough.

Sometimes additional documentation is needed for certain cases, but the above list includes the basics. Once these documents are supplied to a funder, the funder is able to evaluate the case and determine its merit. In short, a funder wants to have a strong expectation that the case will settle in the plaintiff’s favor, because if it does not, the plaintiff does not have to repay the money that is advanced to him/her.

People sometimes ask what I do, in social conversation, and I explain to them how I help people who are in the middle of litigation use the expected value of their lawsuit to get a cash advance.

This usually takes a minute to digest while the person tries to understand how that is done exactly. They have questions like: “Who lends the money?”, “What kinds of cases do you take”,”When does the money have to be paid back?” and “How much does something like that cost?”.

After answering these questions, the person is able to grasp what I do and usually thinks it is pretty remarkable that there is yet another means in our society to get immediate cash - beyond the typical route of going to a bank and/or using credit cards. They are right that it IS remarkable, because a cash advance can really help a person with no (or low) income stream get the cash they need for survival with repayment of that advance deferred. While it is remarkable, though, it does not come without a fee - it is also expensive. The interest rate on a lawsuit cash advance correlates to the risk of loss to the funder. Because plaintiffs are not required to pay back the money they are advanced if they lose a case, funding sources must account for this in their fee structures. Typically a lawsuit cash advance will cost a plaintiff upwards of 2% monthly compound interest or a flat interest rate if the case settles within a certain time frame.

So yes, lawsuit cash advances are expensive. But since everything is relative, we can ask: “Expensive compared to what?” Compared to having a car reposessed? Compared to losing a house? Compared to taking on another credit card with fear of being able to make the monthly minimum payment? The bottom line is that a cash advance is only considered too expensive by someone who does not need the money.

A good broker will make sure the plaintiff understands these fees so the plaintiff can make the right decision for himself/herself and there are no surprises when the case settles and it is time to repay the advance.

When one considers the financial stress a person may be carrying when involved in a personal injury lawsuit, it is easy to understand how that person may have a need for a loan. Often plaintiffs have significant personal financial obligations following their injury. If severely injured, he may not be able to work, or may have significant medical bills associated with the injury.

One may ask “How come the plaintiff’s attorney doesn’t just lend them money?”

First, most attorneys taking on personal injury cases finance the cases themselves - they work on “contingency”, meaning they do not get paid until the case settles, and only if the case settles in their client’s favor. However the attorney fees and litigation costs are being financed, though, attorneys do not have a budget for loaning their clients money - this is a conflict of interest. Imagine if the case didn’t settle to their client’s advantage. This would pose an even greater financial risk for attorneys, prohibiting them to take on as many “contingency” cases.

In a lot of cases, a plaintiff will not want to wait until the end of the litigation process to get their money. For this reason, a growing number of lawsuit financing companies have emerged, usually offering “non-recourse lawsuit loans” to plaintiffs. A loan such as this is also referred to as a “cash advance” or similar terms, so as to avoid state usury laws (laws prohibiting lenders from charging an excessive interest rate.).

Obtaining a cash advance on a lawsuit is a popular solution nowadays for plaintiffs involved in personal injury lawsuits. Of course a plaintiff should consult his lawyer about his circumstance before taking out a pre-settlement lawsuit loan, or choosing a particular litigation finance company to provide a cash advance. Sometimes a case will settle before the plaintiff expects it to, and he may be able to avoid the advance and resulting interest fees altogether. In any case, the attorney’s cooperation is necessary, as he will be asked to provide documentation for the funding source to evaluate the case’s merit (as the basis for the cash advance), as well as agree to the terms of the advance.