If you’re struggling to pay your bills during a personal injury lawsuit, a lawsuit loan could be a good choice. These loans involve applying and getting the case assessed for its merits, strength, and likelihood of succeeding in a settlement or award. From that point on, a lender will contact the applicant with a contract to sign. Once completed, the cash advance is delivered in no time.
If you can get a lawsuit loan with lower interest rates, you may end up paying less in interest over the life of the loan—especially if your funding agreement has a two or 3-year capped rate.
Because lawsuit settlement loans are non-recourse, it simplifies your repayment process since you don’t have to pay it back unless you win your case. Unfortunately, not every plaintiff who applies for lawsuit funding is successful.
If your loan application has been denied, it can feel not very reassuring. Being cash-strapped is daunting, and having your lawsuit funding application denied is discouraging. But the truth is, this is pretty common, and it is something that happens to many personal injury victims.
That said, getting a no for a lawsuit loan isn’t the end of the road. There are many reasons why funding applications get denied, and it doesn’t necessarily mean your legal case is bad. It may just mean you need to wait a little longer to meet the lender’s threshold.
By understanding the reasons behind your lawsuit funding rejection, you can potentially take steps to correct any weak spots in your case and other areas and possibly improve your chances of getting approved in the future.
Common Reasons that Pre-Settlement Funding Applications Are Rejected
It’s certainly a frustrating experience to be turned down for a lawsuit loan—but don’t panic, and try not to worry. The first thing you should know is that having your funding request denied doesn’t define your case or your final settlement amount. Lending companies must set minimum qualifications for all financing approvals on all lawsuits or claims. If you happen to fall short of some of the funding criteria, they may decline your lawsuit loan application.
Beyond that, some settlement lenders might not even explain the reasons behind the disapproval, and you may be left feeling stuck. As with non-recourse cash advances, a common thread is that the legal funding company feels that funding your case is too risky or you live in a state they do not fund. Sound familiar?
Let’s get into some reasons why some plaintiffs may be denied lawsuit funding.
1) You live in an unfundable state.
Although pre-settlement funding for personal injury lawsuits is legal in most states in the US, some states, including Maryland, Colorado, West Virginia, and Kansas, have laws that make it difficult for plaintiffs to get the financing they need. Additionally, cash advances for assistance in workers comp lawsuits are only available in select states, and most states do not fund worker’s compensation lawsuits.
If you live in a state where legal funding companies do provide loans, they have a right to and will confirm that you reside there or somewhere where they fund. However, if your state of residence has implemented laws that make it difficult for pre-settlement funding companies to provide their services, you are essentially guaranteed to get denied.
Whatever your case, if you live in a non-fundable state, you will be denied a lawsuit loan, despite your claim’s compelling strength.
On the other hand, if you move from that state to a state where legal funding companies serve, you may be able to receive financing then.
2) You don’t have an attorney, or they are unresponsive.
When deciding whether they trust you when borrowing funds from your case, funding companies want to feel confident that your cash advance will be paid back. If you don’t have an attorney or your attorney does not wish to collaborate with the lender, they will automatically deny your application. No matter how strong a case you demonstrate, you must be represented by a contingency lawyer, and they must consent to the advance for an application consideration.
Lenders are not allowed to fund your case when you do not have an attorney, and they’ll deny your loan application right away.
Some personal injury victims do not hire an attorney to represent them in their cases with the thought of saving up money. However, never fail to appreciate the impacts of effective legal representation and the likelihood of succeeding in a lawsuit by having a good lawyer.
No matter how sure you are you will obtain a settlement payout, the absence of an attorney can significantly harm the chances of getting a settlement. Securing settlement amounts can be complex without professional negotiations, and lenders are unwilling to take a chance on such high-risk claims.
Consider hiring an attorney on contingency that will work with a funding company and re-apply for your loan.
Your lawsuit loan application will not be accepted if your attorney is non-responsive.
All settlement funding companies have main requirements for all applications. One of them is speaking to your attorney about your case’s strength before it agrees to approve funding. A cooperative lawyer is required because they will acknowledge in the funding agreement to pay back the loan from the settlement proceeds after it is deposited in their escrow account.
Personal injury victims are high-risk borrowers because lawsuit advances don’t require any collateral, credit checks, or income verification. The funder has no guarantee to be repaid unless a lien is placed with an attorney representing you.
In the absence of your lawyer’s consent, you can speak to your attorney about participating in the funding process by explaining your financial situation. The lender may be able to accept your application then.
3) You have maxed out your lawsuit loans.
Legal financing companies want assurance of your claim’s ability to repay the money you borrow. And since lawsuits are risky, they won’t offer more than 10% of the potential settlement value if the case loses or settles for much less than the amount predicted. This value is highly based upon the strength of the claim and the scale of harm you suffered.
If you previously secured a lawsuit loan from another legal funding company, that will not outrightly disqualify you from obtaining another one. However, it could affect your chances of getting a second or third settlement loan. Why? Additional money with a new settlement lender would mean the new company would have to buy out your last advance from the other lender once they approve you.
But before approving you, they will consider the amount you received previously. Then, they’ll look at whether the total amount of money you borrowed equals the ‘portion of the settlement worth requirement’ the lender imposes, which is primarily 10% of the settlement value.
If the lender believes the previous advance is greater than 10% of the settlement’s worth, they fear you are at risk of receiving less and deny you. You can always wait for your case to gain more ground, whether with surgery, collecting more evidence, or a settlement offer. Once your claim has progressed, the value increases, including your loan approval.
In contrast, if there is more space to fund your lawsuit, you will be funded in no time. Only a few lenders do buyouts as big as $2,000,000 and over for personal injuries or wrongful imprisonments. Baker Street Funding is one of them.
4) You have other financial liability black marks.
Although credit score or income is never a factor that lawsuit funding companies rely on, other debt obligations and liabilities play a significant part in approving applications. Under these specific financial circumstances, a legal funding company’s decision to provide loans to plaintiffs can be highly affected.
While reviewing a funding application, some unrelated financial obligations are taken into account. They can be sufficient reasons for the denial of funding. For instance, if you have a lien against you, the money you owe will be taken out of the settlement proceeds because it is legal, and lenders are looking for these signs that you may not be a trustworthy borrower.
A negative financial event against you—such as a lien, judgment, child support, or bankruptcy—is a red flag. If those liabilities are high compared to your expected settlement, the funding company can decide that giving you a lawsuit loan is too risky. Why? Because you may not have enough money left out to repay the loan after your attorney pays your existing financial obligations.
The following liabilities may be considered and made a part of the overall funding decision:
- Unpaid medical bills
- Child support liens
- Tax liens
5) Your case is too risky or too fresh.
As noted above, lenders want to ensure they’ll get repaid. Lawsuit funding companies play upon the risk that you will be awarded a jury verdict or rewarded a settlement package.
One of the primary ways funding companies measure how risky you are as a borrower is by deeply evaluated at some factors in your lawsuit. They want to know that there is sufficient documentation and evidence to satisfy the claim. How? By understanding what affects your case, such as proving fault, the significance of your injury, past injuries, and much insurance the defendant has.
Settlement funding companies want to get a sense of how solid the case is by considering the evidence. For instance, the nature of your injuries and insurance limits can ascertain the standing of the case. But if you approach a lender to obtain a cash advance right after a case is filed, your loan may be denied or offered funding for a lower amount due to the very fresh nature of the lawsuit.
Similarly, the element of fault determines upon whom the liability should befall. A settlement lending company will not accept to finance an at-fault case no matter who they are suing. They will also not take a case that cannot show no-fault proof. Having a strong case means that your attorney can establish, without question, compelling evidence that an insured party was responsible for your injuries. Unfortunately, without clear evidence of wrongdoing, it can become far more challenging to get approved legal funding.
Remember, pre-settlement funding companies are only interested in financing the most genuine claims. Every lender, with no exception, will be concerned if your claim is legit before the court or not.
Getting a Lawsuit Loan May Still Be Possible
Even if you’ve been denied a pre-settlement advance in the past, it doesn’t mean you won’t be able to get approved in the future. The reasons behind your lawsuit funding denial may not exclusively comprise the circumstances mentioned above. They can also be due to other general factors.
Lawsuit loan applications are declined every day for different reasons. To find out why you were rejected, consider talking to the funding company. Understanding the reasons that lawsuit funding applications frequently get rejected can help you find out if there is room to improve.
Some of the options for strengthening your legal funding application are speaking to your attorney regarding your case, waiting for more procedures to be done, waiting for the case to progress, or hiring an attorney.
Learn more about how a lawsuit loan from Baker Street Funding can help you cope with day-to-day expenses. Apply for a cash advance against your legal case today.