Reasons Why Lawyers May Not Want Their Clients To Get Lawsuit Funding 

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Why attorneys dont want clients to get lawsuit funding

Attorneys understand that lawsuit settlement advances or pre-settlement funding may be necessary if their clients are cash-strapped and in need of money to meet their daily obligations. During the pendency of a lawsuit, some of these obligations involve paying for housing, groceries, utilities, medical bills, and more.

However, many attorneys do not like it when their clients seek lawsuit funding for obvious reasons. Some common reasons include thinking their clients will be taken advantage of by predatory lenders charging exorbitant interest rates. Other reasons include an attorney fearing a loss of control of their client’s lawsuit if they agree to give up the right to obtain a portion of the ultimate settlement or jury verdict in return for the advance. 

At some point, your client may urgently need to borrow against their potential legal proceeds, no matter how comfortable you feel. Read on for a look at the possible reasons you could be rejecting that loan, followed by some tips on what to do about it.

Reasons why lawyers may be objecting to lawsuit funding

There are several reasons you can be objecting to your client from getting funding, so here are some possible culprits:

1) You think your client does not need funding

If you do not truly understand the situation your client is in when considering lawsuit funding in the first place, you will naturally discourage them from getting one because you may have some sort of vague sense that your client may be experiencing financial difficulties.

This could be particularly true if your client is out of work (or even if they can still work but had to cut back on hours); they may be having trouble paying mortgage or rent, utility bills, and other expenses that are a necessary part of everyday life.

It’s all well and good for an attorney to tell a client not to seek an advance on their future settlement, but as the one whose family will be homeless or without food to eat without getting case funding, wouldn’t it be best to look out for their welfare?

2) You may fear losing control of the case

An attorney could also be worried about a lawsuit loan because they may think the lender will try to come in and dictate the case’s outcome. However, this concern overlooks that it is always the client’s decision whether to accept a settlement or take a case to trial.

A settlement lender may hope that the client agrees with a specific settlement offer, but they cannot force a client to take an offer, just like the client’s attorney cannot force the client to do so.

3) You believe the interest rates will be predatory

There are predatory funding companies that may try to charge exorbitant interest rates or add all sorts of fees on any financing they may extend to borrowers. On the other hand, lawsuit financing is very competitive, and lenders that do not treat their borrowers right will be quickly weeded out of the field.

In addition, by researching reviews and potential financial crimes in the past, a potential borrower can easily determine whether a lender is legitimate or, instead, has a history of mistreating its borrowers.

4) You think your client will walk away with nothing after a settlement or successful trial

This fear is reasonable as there are some illegitimate companies out there. But it is completely misplaced with legitimate funding companies that offer protection to their borrowers.

The best legal funding companies will only extend a certain portion of the expected outcome of a legal case precisely to ensure they are not left holding the bag if a lawsuit does not go as planned. The best lenders offer caps on the expected recovery percentage and stop all charges if the case takes longer than a certain amount of time to resolve. 

5) You are concerned that lawsuit lending is unregulated

This is a valid concern, but again, it is the client making the decision to obtain financing, and a client and attorney that do their homework can always find a reputable lender. This means that getting an advance is ultimately up to the client, not the attorney. A lawyer may not love that their client is taking a risk by receiving a lawsuit loan, but that is not their decision to make.

Back to regulations, some jurisdictions, like Utah and West Virginia, regulate lawsuit loans by forcing them to charge rates like banks. The bad news is that lawsuit funding companies have pulled out funding in those states since non-recourse funding is being treated as a bank loan. The fact that there are no payments until the case is won, no credit checks, and no income verification, as opposed to banks, put an unreasonable risk on investors who will simply withdraw all financing in those states. There is a reason why banks do not provide settlement loans, and that is because they do not see a future settlement as collateral.

Unfortunately, at the end of the day, ta financially burdened plaintiff fighting a well-capitalized insurance company may feel forced to take a lowball settlement offer in order to survive; thus, these regulations do not protect these borrowers.

If you want protection for your client, ensure the funding they get has capped rates and that they are non-compounding. Regulations don’t help borrowers; legitimate funding companies do.

6) You do not know how the case will resolve

This is an understandable concern for an attorney, but any lawsuit inherently carries with it the risk that it will not culminate in either a settlement or a verdict in favor of that attorney’s client.

That said, a lawsuit advance is non-recourse financing, meaning that you will not be required to pay back any of the money if the case fails. Additionally, simply because the attorney does not know how a case will resolve is not a sufficient reason for a plaintiff not to get legal funding. 

What to do

Regardless of the reason you may be overlooking lawsuit funding, it is ultimately up to your client whether to get it. Lawyers have an ethical duty to act in the best interests of their clients and do what they can to ensure the client obtains maximum recovery. However, even if you do not like when your client is forced to resort to securing funding for their potential case proceeds, the decision to get a lawsuit loan is theirs. 

Word to the wise: consider communicating with your client and understanding their financial situation so you can help them find the right legal funding company while you focus on winning the case.

Last thoughts

When a plaintiff is in serious need of money while a case winds its way slowly through the court system, the last thing they need is their attorney objecting to pre-settlement lawsuit funding.

When all is said and done, no one can tell them not to get lawsuit funding. It is their legal battle, and under the ethics rules that govern attorneys, your job is to do your best in representing them. This doesn’t mean you should pick the first lender you find or the most famous one; consider a lender that provides caps and simple rates to protect your client and their prospected compensation.

If your client needs funding to pay your day-to-day living expenses and more, apply for plaintiff funding to get them through the hard times while their case is pending. Baker Street Funding offers capped rates and simple interest, so you don’t have to worry about predatory charges once you collect a settlement check or award.

Ready to get plaintiff funding? Apply for your client in just 1 minute.

At Baker Street Funding, we give you the inside scoop on pre-settlement funding by covering a variety of ... financing and legal topics to help you made the best financial decision for you and for your litigation. Our experts break down complex ideas in a way that's easy to understand so you can stay informed on current trends as well as tips and fact checked information by the CEO and founder, Daniel Digiaimo. Furthermore, Despite its name, consumer legal funding is not a loan. If you don't receive a recovery from your case, there won't be a repayment. To avoid confusion and simplify matters on, we'll use the word "loan" throughout this article.

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