Structured Lawsuit and Annuity Settlements News

Having to deal with the tremendous cost of legal aid can be a daunting, if not impossible, task. Many people faced with personal injuries or harassment cases simply cannot afford the impending costs of legal fees and / or the every day costs of living. Turning to lawsuit settlement funding may be a practical answer when there seems to be no way to manage financial burdens during these specific challenges.

There are two main types of lawsuit settlement funding. Pre-settlement funding provides money in advance of a legal outcome. It may also be referred to as a Lawsuit Loan, Lawsuit Cash, Personal Injury Finance or Plaintiff Living Expense Finance. Post-settlement funding is determined once a lawsuit is resolved. Post-settlement funding may be referred to as Post-Settlement Cash Flow Acceleration, Legal Factoring, or Bridge Financing.

Although one may question the need for post-settlement funding (after all, once a settlement is determined why wouldn't the attorney or the plaintiff just use that money?), the reality is that even though a case is settled, it may still take quite a long time before lawyer and client actually receive the settlement money. Therefore, post-settlement funding is only necessary when there is a lapse between resolution of the case and receipt of the designated settlement. A post-settlement funding company can provide immediate funds (a cash advance) for attorneys and their clients based on the dollar amount of the settlement. This can be a partial payment or a "full-fee payment", depending on the needs (and the terms) of all involved parties. The settlement funds will then be used to pay the debt with interest. Comparatively speaking, post-settlement funding exists for a shorter duration than other financial options, and therefore it may dictate a lower lump cost.

Pre-settlement funding describes a cash advance given to the injured individual with the understanding that the money will be paid back after a victory or settlement in court. Plaintiffs can quickly find themselves in need of money, especially if they are injured, unemployed, coping with a reduced income, or dealing with the extra burden of healthcare or disability expenses. It is essential to realize that pre-settlement funding is a non-recourse pecuniary advance. Therefore, if the outcome of the case is not an advantageous one, the injured person does not have to pay the money back. Also, if the actual settlement proves to be less than the amount of the pre-settlement funding, payback will not exceed the injured party's share of the settlement.

Therefore, pre-settlement funding exists when an injured (or harassed) person files a personal injury lawsuit and receives funds in advance to assist with the actual lawsuit or living expenses. This money will then be paid back after a settlement is received. The plaintiff is willing to lose some of his or her anticipated settlement money in order to pay back the money with interest.

Pre-settlement funding brings with it issues of ethics and suitability. Champerty is a term used to describe a type of common law maintenance, a situation where aid is given to the litigant by a party who does not have a genuine interest in the case. In exchange, the party giving the aid will receive a portion of the (gained) outcome (the winnings of the case).

Therefore, the potential for all sorts of money advances for the sole purpose of financial gain (and not justice) is present. Critics of champerty see that this type of arrangement can lead to self-indulgent and trivial lawsuits. However, late in the 20th century, champerty was literally thrown into everyday culture as media commercials enticed `victims' to have their cases evaluated in order to receive no risk pecuniary assistance before going to trial. Of course, the money advanced represented just a portion of the predicted court judgment, but it opened up a whole new set of options for people who wanted to bring their cases to court. On the other hand, one can perceive champerty as a constructive, productive agent wholly responsible for getting valuable and important cases to trial.

Pre-settlement funds are not considered loans. They may be termed investments, cash advances or even venture capital. Specific laws exist that prohibit excessive interest rates with loans. Therefore, due to legal technicalities pre-settlement funding terminology will avoid `loan' vernacular and the contract becomes one that does not focus on repaying the actual amount received. Instead an agreement is spelled out whereby only a portion of the verdict is to be paid back. The plaintiff keeps the cash advance.

Actual amounts of pre-settlement funding vary greatly. Variables affecting dollar amounts are determined by the specific companies involved (what can they afford?), the attributes of the legal case itself, the needs of the plaintiff, and the assessment of the probable outcome. Once the injured person approaches a funding company, that company will then obtain specific information about the case through the lawyer. A verdict value is determined and a cash advance is made available. Terms are spelled out (Is there a flat flee? A monthly fee?). It is understood that the finance company will not receive any payback until the case is settled and the plaintiff receives the case winnings. If the plaintiff loses the case, there is no money owed. Obviously, cases are assessed carefully and only those cases believed to eventually come to victory in court will be approved for pre-settlement funding. Fees associated with this type of funding can be high, as litigation can take years to come to fruition. It is always advisable to shop around for the best terms if you have decided to accept pre-settlement funding.

Attorney litigation financing describes a loan paid to the lawyer in order to assist him/her with case-specific expenses and obligations. Although most current attorney loans are recourse loans, they can be non-recourse loans as well. These loans may require monthly interest payments before the case settles, but the actual principle will not be paid back until the case is over.

Remember that non-recourse financing is only beneficial to the lending company if the case is won. If the case is lost, the financing company will reclaim nothing. Recourse financing, on the other hand, will demand that all money (plus interest) be paid back regardless of a court outcome.

It is also important to understand the distinction between debt financing and equity financing. With debt financing, the money is not viewed as a real loan (unless specific state laws exist based on regulating this exchange), but monthly interest will be charged. Depending on specific terms, interest may have to be paid out each month or it can be held until the case is finalized. Equity financing, on the other hand, is more like an actual investment based on the details of the litigation. Return for the financial company will be a percent of the actual recovery earnings.

Personal injury and harassment cases can range from unnerving to tragic. For many individuals who suddenly find themselves out of work or in need of costly healthcare, every day expenses and legal fees are mind-boggling and unaffordable. Lawsuit settlement funding exists to aid those individuals so that they can seek justice and continue to manage their daily affairs. With any financial venture, it is salient to research the most appropriate terms and conditions. Although laws exist to protect the consumer, pre-settlement funding in particular, can be very costly. It is always advisable to shop around and ensure that one is receiving an optimal pay structure so that the real focus can be on obtaining justice in the court system.