Lawsuit funding is a cash advance from an attorney to a plaintiff based on the potential for a future settlement. This pre-settlement funding is repaid with the proceeds of the settlement.
Lawsuit funding firms forgive the cash advance in the unlikely event the case does not result in a cash reward for the plaintiff. The lawsuit funding firm is betting on a large settlement and stands to make a large profit if the case results in a large cash settlement.
Most clients of lawsuit funding firms are personal injury, worker’s compensation, and medical malpractice cases, but a variety of cases may be eligible for lawsuit financing.
The advantage to using a lawsuit funding firm is that it allows a plaintiff to avoid having to settle a lawsuit for less than they deserve because he or she cannot afford to continue the suit. Lawsuit funding can also be used to pay living expenses while awaiting settlement. The disadvantage, however, is that lawsuit funding firms often take a larger portion of the eventual settlement. The amount of the loan also depends largely on the strength of your case and the amount of risk involved.