The legal funding industry worldwide is a group of capital firms and lending companies willing to provide financial assistance to people involved in litigations.
These companies aim to relieve plaintiffs from financial stress and assist them in providing for their families.
Under these programs, plaintiffs have the option to apply for financial relief offered by lawsuit funding companies upon a proper assessment of their cases.
Why do plaintiffs apply for pre-settlement funding?
The motive behind such financing programs is to empower people suffering from financial stress during their cases’ pendency period.
Taking matters to the courts isn’t a regular thing for many, and litigations often push even well-off individuals to bring off debt. Especially in personal injury cases, where plaintiffs are left with severe and long-term disabilities, where arranging finances to afford household expenses and to make ends meet can be difficult.
Many of these individuals may even choose not to go file lawsuits solely due to limited finances available to them. Clearly, fighting a case while paying for the regular household expenses and going through primary medical treatments in parallel will result in crippling debt.
For this very reason, lawsuit funding companies are increasingly being contacted by plaintiffs to obtain cash advances against their pending settlements to meet their expenditures.
After an application has been made to a lawsuit financing company, the case is assessed for its merits, strength, and the plaintiff’s likelihood of succeeding in a settlement award. After a successful case evaluation, the company will contact the applicant with a contract for the victim and the attorney to sign. Once the contract has been successfully executed, the cash advance shall be delivered in no time.
However, there can be instances when plaintiffs may outrightly be denied these cash advances based on specific reasons.
These reasons may not exclusively comprise of the plaintiff’s own circumstances or the strength of the case. Still, they can be due to general factors too. A few reasons why some plaintiffs may be denied lawsuit funding are mentioned here.
State laws and pre-settlement funding
Although cash advances for assistance in lawsuits are legal and famous 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 help they need.
If you’re based in one of these states, you will be denied lawsuit funding, despite your case’s compelling strength. Where in case you have applied for lawsuit funding in a state where legal funding is not legalized, the lending company has a right to and will confirm that you actually reside there or somewhere where they fund.
If it is found that your state of residence does not allow lawsuit funding, your application will be rejected.
Not having an attorney
If you do not have an attorney we are not allowed to fund your case, therefore, is not possible to get lawsuit funding without a lawyer.
Many plaintiffs do not hire an attorney to represent them in their case with the thought of saving up money. And those who do, fail to appreciate the impacts of effective legal representation and the likelihood of succeeding in a lawsuit by hiring a good attorney.
Even if the case doesn’t require sophisticated legal representation, and the plaintiff only seeks to obtain a settlement payout, the absence of an attorney can significantly harm the chances of getting a settlement.
Without professional negotiations, securing settlement amounts can be difficult.
Moreover, the lending company needs to discuss the case’s strength with an attorney before it agrees to provide funding.
In the absence of an attorney, the pre-settlement funding company would insist you hire one, no matter how strong a case you demonstrate. So, you must be represented by an attorney if you want a settlement funding firm to even consider your case.
Other sources of funding
Having secured legal funding from another company would never outrightly disqualify you from obtaining another one. However, it does affect your chances of getting a second or third loan.
The second source of finance would mean that the award of damages or settlement will have to be shared with the new source or company.
In view of this, lawsuit funding companies look at whether the total amount of money borrowed equals the settlement worth, which is mostly 10% of the settlement value they give.
Suppose the lawsuit lender believes that the amount borrowed is in greater percentage than what would possibly be awarded by the court. In that case, an instant refusal to lend money can be expected. This totally depends upon the weight of the claim and the scale of harm suffered.
Legal financing companies only need assurance of your claim’s ability to pay back the money borrowed. But if there is more space to fund your lawsuit, you will be funded in no time, and only a few companies do buyouts as big as $2,000,000 and over for personal injuries or wrongful imprisonments.
Baker Street Funding is one of them.
Other financial liabilities
Although credit score is never a factor that lawsuit funding companies rely on, other debt obligations and liabilities play a significant part.
While reviewing a funding application, these unrelated financial obligations are taken into account. They can be sufficient reasons for the denial of funding. Liabilities, including child support liens, bankruptcies, pending surgery liens, will be considered and made a part of the overall decision arrived.
The claim is fresh
What happens when a person, right after an injury is suffered and a case is filed, approaches a lawsuit funding company to obtain a cash advance? He would probably be denied funding or provided a small amount such as $500 if the case is worth it due to the very fresh nature of his claim.
Lawsuit funding companies play upon the risk that a plaintiff will be awarded damages or that he would secure a settlement package. The company would hence need to see if the claim is maintainable before the court or not.
Additionally, it would need to make sure that there are sufficient documentation and pieces of evidence to satisfy the court.
But in personal injury cases where the plaintiff is only getting therapy, it may even be held so that the company can ascertain the standing of the case. In cases like wrongful convictions, if an application is filed before the court has made required determinations, the application would straightaway be declined.
The gravity of the claim and liability
It would never be wise of a settlement lending company to grant finances to a person who had received personal injuries due to a fault of his own and had subsequently sued another party.
The element of fault determines upon whom should the liability befall. To resolve this, the pre-settlement funding company may act as an adjudicator even before the court has passed a verdict so that the most genuine claims are financed.
These reasons, amongst other specific circumstances, can significantly impact a legal funding company’s decision to award damages to a plaintiff. Hence, victims should apply for cash advances against their legal cases, keeping in mind all negative attributes are absent from their applications.
Learn more about how a lawsuit loan from Baker Street Funding can help you cope with day-to-day expenses.