Quick Answer: Pre-settlement funding underwriting evaluates a lawsuit to determine eligibility and funding amount. It assesses your case’s merits, damages, chances of winning, and potential settlement value.

Personal injury plaintiffs often find themselves caught in a financial bind as they await the outcome of their court cases. Medical bills, lost wages, and daily living expenses can quickly pile up—a stressful situation that no one wants to experience.

When you’re up against this kind of wall, a lawsuit loan, also known as pre-settlement funding or legal financing, gives you money upfront against your prospective settlement. Best part? You only pay it back if you win.

But before you get the green light, there’s a process called underwriting. This is where your case is deeply evaluated to see if you qualify for the advance. Let’s dive into what underwriting involves.

What Exactly Is Pre-Settlement Funding Underwriting?

Underwriting in pre-settlement funding is the process of evaluating the risks associated with a lawsuit before providing financing. This assessment is conducted by professionals who often have backgrounds in both finance and personal injury law—we refer to them as lawsuit loan underwriters. Leveraging their combined expertise, they predict case outcomes and determine if the investment is financially sound.

Why It Matters

Underwriting protects both the plaintiff and the legal funding company. For you, it means you can confidently receive up to 10% of your estimated settlement to cover your immediate expenses—like medical bills, rent, utilities, and groceries. It also means you won’t owe more than fair if the case settles for less than expected.

For lawsuit loan companies, it lowers the risk of non-payment as it allows them to avoid investing in lawsuits that could fail. Without underwriters, their operations would take a hit, and the ability to support those seeking justice would fall apart.

From Application to Funding

Here’s a closer look at what you can expect:

Initial Application. Start by submitting an application online or by phone by calling (888) 711-3599. You’ll need to provide details about your case, including attorney information.
Case Documentation. Next, your attorney submits all the necessary case documents to the underwriter. The accuracy and completeness of these documents is absolutely necessary for qualification. Without an attorney, you won’t be approved.
Case Risk Assessment. Experts evaluate the risks in your case within 24-48 hours. They tend to approve cases that have strong merits and a good chance of recovery.
Offer and Agreement. If your lawsuit is strong, you’ll receive a funding offer detailing the loan amount and terms. You and your attorney review and sign the contract. Funds are then quickly disbursed, typically within a few hours to a day.

How Pre-Settlement Legal Funding Underwriters Assess the Strength and Risks of a Lawsuit

Fault Laws. Underwriters first examine comparative and contributory negligence. These laws help determine liability and influence the damages you can claim. For example, contributory negligence states may bar claims if the plaintiff shares any blame.
Defendant’s Insurance. To set realistic expectations on the max the insurance company may pay in a settlement, the defense’s “insurance policy” is required. Low insurance coverage or lack thereof may result in funding denial.
Strong Evidence. The next step is looking into the evidence that shows the other party’s fault. Medical records, police reports, legal filings, witness statements, expert opinions, and any available video footage helps underwriting decide if you have a descent case.
Injury and Damage Severity. Generally, serious injuries can increase claim value due to higher expenses, longer recovery times, and pain and suffering. Conversely, minor injuries may reduce the perceived settlement amount.
Priority Liens. Another important consideration in the underwriting process is priority liens. Why? Because these liens have legal precedence and must be paid first from your settlement money. This includes current bankruptcy filings, medical liens, spousal or child support liens, and tax liens.
Plaintiff Past. Having a less-than-perfect past doesn’t automatically disqualify you from receiving fair compensation. However, some loan companies have strict policies against funding plaintiffs with certain backgrounds. Things like a felony, pre-existing injuries, or past litigation might raise some eyebrows.
Court Timelines. Underwriters are more inclined to finance cases that will be resolved sooner rather than later, as the value of money decreases over time due to inflation and other factors. That means that a lengthier case with the same settlement amount as a shorter one holds less value today.
Litigation Stage. Different stages carry different levels of risk. For instance, an appeal stage is generally riskier due to the unpredictable nature of appeals. On the other hand, settlement stages tend to be more predictable compared to discovery or trial stages.
Attorney’s Reputation. Respected attorneys with a solid track record can boost how a case is perceived and help secure legal funding. Their experience often leads to better outcomes and shapes how underwriters view a case’s chances of success.

Comparing Underwriting: Pre-Settlement Legal Funding Vs. Traditional Loans

Personal Loans. Underwriting typically requires good credit scores, stable income, and other financial indicators to assess a borrower’s repayment ability.
Mortgages. Mortgage underwriting involves evaluating several aspects of financial history, employment stability, and property appraisals.
Title Loans. Title loans use a vehicle’s value as collateral, with underwriting centered on the clear title, market value, and borrower’s repayment ability.
Credit Cards. Credit card underwriting examines an applicant’s credit history, spending habits, and income to determine eligibility for a revolving line of credit.

How Pre-Settlement Funding Differs

Unlike traditional loans, legal funding underwriting doesn’t involve monthly installments, scrutinizing your credit history, or checking your income. Instead, underwriters primarily focus on the merits of your case and estimating the future compensation you might or might not receive from the settlement or lawsuit award.

This type of funding is non-recourse, meaning repayment is only required if the case is won or settled favorably. You’re free to use the funds to cover living expenses, medical bills, and any other urgent needs.

Underwriting Preferences: Case Types & Their Funding Potential

Favored by Underwriting

Personal Injury Cases. Personal injury cases, like car accidents, slip and fall incidents, wrongful death, medical malpractice and nursing home negligence, are typically favored by funding companies.
Wrongful Imprisonment Claims. Cases of wrongful imprisonment often have clear and compelling evidence, like DNA testing. These factors reduce risk and increase the potential return on investment, making them valuable.
Workplace Injuries and Labor Law Cases. Despite involving extensive trials, third-party negligence claims offer strong investment opportunities for underwriters due to potential high damages.
Mass Tort Cases. An underwriter may consider funding a mass tort only if there is clear evidence of severe harm caused to a large group of people.
Product Liability Cases. While not a favorite choice for lenders, certain product liability cases with strong evidence, serious damages may make the cut for legal financing.
Settled Cases. If you’re awaiting a settlement payout, underwriting will be more inclined to provide funding as it reduces the lender’s risk and increases the probability of repayment.

Less Favored by Underwriters

Workers’ Compensation Cases. Pre-settlement loans are unavailable in states where workers’ comp go directly to the claimant and not the lawyer. This is because loan companies depend on attorneys’ legal obligation to manage repayment from the settlement funds, as outlined in the funding agreement.
Class-Action Lawsuits. Despite their potential for large settlements, class action lawsuits are generally not favored by lawsuit loan underwriters.
Employment Claims. Specifically, employment claims like wage violations and wrongful termination are less frequently funded due to unpredictable settlements. However, cases with existing settlement offers are more likely to receive funding approval.
Commercial Litigation. While these cases can result in millions in recovery, their complexity and duration can often be a deterrent for funding companies. Underwriters may be more inclined to approve them if these have already settled.
Home Insurance, or ADA Claims. Home insurance claims, particularly those related to disasters, are often not funded due to its complicated nature, uncertainty, and duration required to achieve a resolution. ADA claims, conversely, frequently involve serial litigants who take advantage of the system for financial gain, rather than engaging in genuine advocacy for accessibility enhancements. This exploitation, coupled with heightened judicial scrutiny and the possibility of minimal settlements, makes these claims way too risky and less appealing for funding.

Your Role in the Process

Be transparent about your case.
Disclose any previous loans obtained against the settlement or any other liens.
Organize all relevant documents pertaining to your litigation.
Offer a clear and convincing narrative of your lawsuit.
Work closely with your attorney.
Respond quickly to information requests.
Keep the lender informed of any developments in your lawsuit.
If you have received any settlement offers, share these with the funding company.

The Takeaway

Pre-settlement funding underwriting is an expert-led evaluation process that determines if a personal injury plaintiff qualifies for an advance on an expected settlement.

Factors like the case’s merits, injury severity, liability, and applicable laws are all considered. If the case is strong, funding is approved, with no credit checks or monthly repayments required. This loan only needs to be repaid if the case is won, making it a low-risk solution for those in a financial bind.

At Baker Street Funding, we’re committed to providing the quick, transparent support you need throughout this process. Our underwriters are not only highly skilled at assessing each case, but also understand the unique difficulties plaintiffs face.

With Baker Street Funding, you can confidently apply for a lawsuit loan, knowing you’re in good hands. Contact us today at (888) 711-3599 to learn more about how we can help you secure the financial assistance you need while your accident case is pending.