Dealing with the financial burdens of a personal injury or civil rights case can be overwhelming. While awaiting a resolution, the ongoing expenses and medical bills can take a toll on your financial well-being. In such situations, pre-settlement funding offers assistance during the litigation process. However, understanding the repayment obligations associated with this type of funding and the consequences if you fail to repay the funds after winning your case will save you many headaches.
Here’s a look at:
- What is non-recourse pre-settlement funding
- Your attorney’s role
- Consequences of non-payment
- No repayment if you lose
- Easy application process
What is Non-Recourse Pre-Settlement Funding?
Non-recourse pre-settlement funding is a financing option where you receive cash based on the anticipated monetary recovery from your case until a legal settlement is reached. Unlike traditional loans, your repayment responsibility with non-recourse funding depends entirely on the outcome of your case. If you win, you will need to repay the principal amount and interest rates. However, if you lose, you are not obligated to repay anything.
Your Attorney’s Role in Repayment
To secure pre-settlement funding, your attorney must consent to the loan and sign the funding agreement. This loan agreement establishes a lien on your expected lawsuit proceeds, similar to a medical lien. Attorneys understand the importance of this process in helping their clients access necessary funds, so they sign a pre-settlement funding contract agreeing to repay the borrowed amount upon a successful settlement. When your settlement check arrives, it goes into your attorney’s trust account. Your attorney will pay off all liens, including the pre-settlement advance.
Consequences of Non-Repayment
If you win your case but fail to repay pre-settlement funding, it can have serious legal repercussions. In most legal systems, the repayment of non-recourse funding is considered a non-dischargeable debt, which means it must be repaid. Failure to do so can result in wage garnishment, property repossession, potential disbarment of your attorney, and even being sued by the funding company.
For this reason, understanding your responsibilities before taking out pre-settlement funding can avoid potential financial pitfalls and adverse legal consequences.
No Repayment if You Lose
One of the significant advantages of pre-settlement legal funding is that if you lose your case, you do not have to repay the advance. This alleviates the financial pressure, allowing you to move forward without the stress of repaying a loan if your attorney is unsuccessful in settling your case. Similar to a contingency fee agreement with your attorney, you only owe repayment if you win your case and receive financial compensation.
The Easy Application Process
The application process for pre-settlement funding is simple. If you have a strong case and legal representation, you may be eligible for an advance. To apply, you need to provide your name, contact information, state of residence, and your attorney’s contact information. The funding provider will assess your case and determine the appropriate amount to disburse based on various factors, such as the severity of your injuries, pain and suffering, lost wages, and medical bills. Once approved, you can expect to receive the funds within 24-48 hours.
The Takeaway
Pre-settlement legal funding is a useful solution for people experiencing financial difficulties while involved in a lawsuit. It provides quick access to cash, enabling you to cover urgent expenses while pursuing a reasonable settlement offer. Some of the expenses it helps you cover are living expenses, transportation, rent, medical bills, and more. Nonetheless, it will only benefit you to know the repayment responsibilities tied to this form of financial support and the possible consequences if you don’t pay back after winning the case.
By familiarizing yourself with the terms of your loan agreement and understanding the repayment arrangements that will be made by your attorney, you can go through the process confidently and make a wise decision regarding the loan. Ultimately, this type of financing can make a significant difference in ensuring you receive the settlement you deserve.
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FAQ
What are the conditions for repayment?
The conditions for pre-settlement funding repayment depend on the outcome of your case. Once the settlement proceeds of your case are received, then the payment term will be on the funding agreement that you signed.
Do I have to repay the funds if I lose the case?
If you do not win your case, pre-settlement legal funding is forgiven debt, and no repayment is required.
How long does my attorney have to pay the legal funds back?
Since your attorney is the one responsible for repaying the advance, the term length from when your monetary recovery is received is set forth according to the funding agreement between you and the lawsuit loan company. Typically, funding companies expect repayment within 3 business days from when the settlement proceeds hit the attorney’s trust account, while other lenders may offer a 14-business-day limit.
