Monthly Archives: August 2016

A Guide to Lawsuit Financing

It is done in the movies all the time. Someone’s rights are violated, they take the violator to court, a whole slew of drama ensues, and finally the violated party (called the plaintiff) wins the case against the violator (called the defendant). But as we know, things are rarely as cut and dry as that in real life. What movies fail to tell us about the legal process is that legal proceedings cost money, usually very large sums of money at that. So what do you do if you are a little short on cash and require legal aid?

There are companies who are willing to lend money to people who need it in exchange for either a portion of the settlement, or a monthly fee. What follows is an overview of what lawsuit financing is and how it can help you with regard to your legal needs.

Lawsuit financing: an overview

When a lawsuit financing company decides to assist you with a lawsuit, it is making an investment on you and the validity of your case. The financing company will calculate, with a reasonable amount of certainty, how much you stand to gain if you win the case or if you allow for an out-of-court settlement. It seeks to make a profit on your case as a return on its investment. This means that you will have to pay for your financing with the money you get from winning the case.

The first way to pay for your lawsuit financing is with a fixed amount that is agreed upon by you and the financing company. This is also sometimes referred to as flat-rate payment. Usually, in addition to the initial amount paid out to you, the financing company will require you to pay 10 percent in interest as a return on its investment, though this may vary from state to state and from company to company.

The second way to pay for your financing is by recurring payment. Made every month, recurring payment is much like an insurance premium. However, you may be required to pay as much as 15 percent in interest on the initial amount that was lent to you.

Which payment method to use

Generally, if you or your lawyer foresees the case going to court, expect the litigation and legal proceedings to take awhile. In this case, you may opt for a flat fee, which, while sizable, may be less than the total cost if you had selected to pay a recurring fee. On the other hand, if you expect a quick settlement, the recurring fee may be best for you. Either way, be sure to shop around and be selective about the financing company you accept aid from. Visit one company and use the options it offers as a baseline for determining what would be best for you. Just keep in mind that the nature of lawsuit financing is business. Regardless of which payment method you select, the financing company will make money from you. Your task is to make their profit as painless as possible for you.