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Comprehensive Guide to Pre-Settlement Lawsuit Funding

Pre-settlement funding, also known as lawsuit funding, litigation financing, or lawsuit advancement is a financial arrangement where plaintiffs receive a cash advance against the potential settlement of their legal claims. This type of funding is especially beneficial for individuals involved in personal injury lawsuits or other legal disputes who may be facing financial hardships while waiting for their case to resolve.

This comprehensive guide aims to provide a detailed overview of pre-settlement funding, including its purpose, process, benefits, risks, and key considerations.

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The information is provided for educational and informational purposes only. Such information or materials do not constitute and are not intended to provide legal, accounting, or tax advice and should not be relied on in that respect. We suggest that You consult an attorney, accountant, and/or financial advisor to answer any financial or legal questions.

Why would you need Pre-Settlement Funding

The purpose of pre-settlement funding is multifaceted, addressing the financial challenges faced by individuals navigating the legal system.

Often employed in personal injury cases and other protracted legal battles, lawsuit funding serves as a lifeline for plaintiffs who find themselves in dire financial straits due to mounting medical bills, lost wages, and other expenses. By providing a cash advance against the anticipated settlement, this form of lawsuit funding offers immediate relief, allowing plaintiffs to meet their day-to-day living costs, cover medical treatments, and sustain themselves throughout the litigation process.

Additionally, pre-settlement funding plays a crucial role in leveling the playing field, ensuring that individuals, who might otherwise succumb to financial pressure, can sustain their legal pursuits against better-resourced opponents. In essence, the purpose of pre-settlement lawsuit funding is to empower individuals with the financial means to pursue justice without compromising their ability to meet their basic needs during the lengthy legal proceedings.


How Pre-Settlement Funding Works*


  • Application Process: Plaintiffs initiate the pre-settlement funding process by submitting an application to a lawsuit funding company. This application typically includes details about the legal case, the expected settlement amount, and other relevant information.
  •  Evaluation of Cases: The lawsuit funding company assesses the merits of the case, considering factors such as liability, damages, and the probability of success. Legal professionals may be involved in this evaluation to determine the strength of the plaintiff's claim.
  •  Approval and Funding: Upon approval, the funding company offers a cash advance to the plaintiff, typically ranging from a percentage of the anticipated settlement. This allows the plaintiff to address immediate financial needs while their legal case continues. Importantly, the funding is non-recourse, meaning repayment is contingent on the successful resolution of the case; if the case is unsuccessful, the plaintiff is generally not obligated to repay the advanced funds.


Types of Cases Eligible for Pre-Settlement Lawsuit Funding

Personal Injury Cases: Personal injury cases, including motor vehicle accidents, slip and fall incidents, and medical malpractice claims, are among the most common types eligible for pre-settlement funding. Plaintiffs in these cases often face substantial medical bills and lost wages, making pre-settlement funding crucial for meeting immediate financial needs during the legal process.

Employment Discrimination: Cases involving employment discrimination, harassment, or wrongful termination may qualify for pre-settlement funding. Employees pursuing legal action against their employers may experience financial strain due to unemployment or workplace issues. Funding provides financial relief until a resolution is reached.

Product Liability: Individuals with product liability claims, stemming from defective or harmful products, may seek pre-settlement funding. These cases often involve significant expenses related to medical treatments and product recalls, making funding essential for plaintiffs awaiting compensation for injuries or damages caused by faulty products.

Medical Malpractice: Pre-settlement funding is commonly utilized in medical malpractice cases where patients suffer harm due to professional negligence. Given the high costs associated with medical treatments and ongoing care, plaintiffs may opt for funding to cover immediate financial burdens while pursuing justice for medical errors.

Others: Various other legal disputes, such as class-action lawsuits, mass torts, and civil rights cases, may also be eligible for pre-settlement funding. The key criterion is often the viability and potential success of the legal claim, allowing plaintiffs in diverse legal scenarios to access financial assistance during the litigation process.

Benefits of Pre-Settlement Lawsuit Funding

Financial Relief: Pre-settlement funding provides immediate financial relief to plaintiffs, addressing pressing needs such as medical bills, living expenses, and other financial obligations. This helps alleviate the financial strain that often accompanies legal battles, allowing individuals to focus on their case without sacrificing their well-being.

Ability to Cover Living Expenses: Plaintiffs involved in lengthy legal proceedings may face challenges meeting everyday living expenses. Pre-settlement funding ensures that individuals can cover rent or mortgage payments, utilities, groceries, and other essential costs while their case progresses through the legal system.

Non-Recourse Nature: One of the notable benefits is the non-recourse nature of pre-settlement funding. If the plaintiff does not win the case, they are typically not required to repay the advanced funds. This feature shifts the risk from the plaintiff to the funding company, offering a measure of financial security to individuals pursuing legal action.

Peace of Mind: Knowing that immediate financial needs are met allows plaintiffs to approach their legal proceedings with greater peace of mind. This mental relief can positively influence the plaintiff's ability to participate effectively in the legal process, fostering a more favorable outcome.

No Monthly Payments: Unlike traditional loans, pre-settlement funding typically does not require monthly payments. Repayment is contingent upon the successful resolution of the case, providing flexibility for plaintiffs during the course of the legal proceedings.


Risks and Considerations

High Cost: One of the primary risks associated with pre-settlement funding is the high cost. Funding companies charge fees and interest rates that can be significantly higher than traditional loans. Plaintiffs should carefully consider the total cost of the funding against the potential settlement amount.

Potential Impact on Settlement Amount: Accepting pre-settlement funding may impact the final settlement amount. Since the funding company typically receives a portion of the settlement, plaintiffs should weigh the potential reduction in their ultimate compensation against the immediate financial relief provided by the funding.

Choosing a Reputable Funding Company: Not all pre-settlement funding companies operate ethically or transparently. Some may impose hidden fees, confusing terms, or engage in practices that could disadvantage the plaintiff. It is crucial to thoroughly research and choose a reputable funding provider with a track record of fair dealings.


Calculating the Cost of Pre-Settlement Lawsuit Funding

Fees and Interest Rates: Pre-settlement funding involves fees and interest rates that can vary among funding companies. Plaintiffs should be aware of the specific terms, including application fees, underwriting fees, and interest rates. These costs are typically deducted from the final settlement amount.

Repayment Structure: Understanding the repayment structure is crucial for calculating the cost of pre-settlement funding. Some funding companies charge a flat fee, while others apply compound interest over time. Plaintiffs should carefully review and comprehend the terms of repayment to assess the overall financial impact.



Alternatives to Pre-Settlement Funding

Negotiating with Creditors: One alternative to la funding is negotiating directly with creditors to arrange temporary payment plans or deferments. This approach is particularly applicable to individuals facing financial challenges due to medical expenses or other obligations unrelated to the legal case. Engaging in open communication with creditors can lead to more flexible terms, providing short-term relief without the costs associated with pre-settlement funding.

Seeking Financial Assistance: Plaintiffs may explore various financial assistance programs offered by government agencies, non-profit organizations, or community resources. These programs may provide grants, low-interest loans, or other forms of aid to individuals facing financial hardship. Seeking financial assistance outside the legal realm can be a viable option, especially for non-legal expenses.

Structured Settlements: In certain cases, structured settlements may be an alternative to pre-settlement funding. Instead of receiving a lump sum, plaintiffs can arrange for periodic payments over time. While this approach may not provide immediate cash, it can offer financial stability in the long run, without the costs associated with pre-settlement funding.

Selecting a Pre-Settlement Funding Provider

Researching and Comparing Companies: Conduct thorough research on pre-settlement funding providers. Compare their reputation, customer reviews, and Better Business Bureau ratings. A reputable company should have a transparent track record, ethical practices, and clear terms and conditions.

Reading and Understanding Contracts: Carefully review the terms of the funding contract. Pay attention to fees, interest rates, and repayment structures. Ensure that the agreement is clear and free of ambiguous language. If needed, seek legal advice to fully understand the implications of the contract.

Seeking Legal Advice: Consult with your attorney before finalizing any pre-settlement funding agreement. Legal professionals can provide valuable insights into the potential impact of funding on your case and negotiate favorable terms with the funding company. Having an attorney involved ensures that your interests are protected.

Checking for Hidden Fees: Be vigilant for any hidden fees that may not be immediately apparent. Some funding companies might impose additional charges, such as application fees, underwriting fees, or processing fees. Clarify the complete cost structure before committing to a specific provider.

Considering Customer Service: Evaluate the customer service and responsiveness of the funding company. A reliable provider should be accessible to address your inquiries promptly. Effective communication is crucial throughout the funding process, from application to the resolution of your case.

Checking for Ethical Practices: Choose a pre-settlement funding provider that adheres to ethical practices. Avoid companies engaging in aggressive tactics, excessive advertising, or those that pressure you into accepting their services. Ethical providers prioritize transparency and ensure that clients make informed decisions.

Verifying Licensing and Compliance: Ensure that the pre-settlement funding provider is licensed and complies with applicable regulations in your jurisdiction. Confirming their legal standing provides additional assurance of their legitimacy and commitment to operating within the bounds of the law.


The Role of Attorneys in the Process

Attorney Cooperation: Attorneys play a crucial role in pre-settlement funding by collaborating with funding companies to facilitate the process. They assist clients in preparing and submitting necessary documentation, provide case details to the funding company, and communicate directly to ensure a smooth and efficient funding process.

Assessing Funding Options: Attorneys help plaintiffs assess their pre-settlement funding options by considering the financial implications on the overall case. They provide advice on the appropriateness of seeking funding, the potential impact on the final settlement, and help clients make informed decisions that align with their legal and financial objectives.

Negotiating Funding Terms: Attorneys negotiate with pre-settlement funding providers to secure favorable terms for their clients. This may include advocating for lower fees, reduced interest rates, and clear repayment structures. Their involvement ensures that the funding arrangement is in the best interest of the client.

Protecting Client Interests: Attorneys act as advocates for their clients' best interests throughout the pre-settlement funding process. They review funding contracts, identify any potential pitfalls or ambiguities, and ensure that the terms align with the client's legal strategy and financial well-being. This safeguards clients from unfavorable conditions.

Addressing Liens and Subrogation: Attorneys navigate the complexities of liens and subrogation rights associated with pre-settlement funding. They work to protect their clients from any potential complications related to repayment obligations, ensuring that the funding company's claims are appropriately addressed in the settlement.

Ensuring Ethical Practices: Attorneys play a vital role in ensuring the ethical practices of pre-settlement funding providers. They guide clients toward reputable funding companies, scrutinize contracts for fairness and transparency, and advise against engaging with providers who may exploit the financial vulnerabilities of plaintiffs.

Maintaining Attorney-Client Privilege: Attorneys uphold attorney-client privilege throughout the pre-settlement funding process. They ensure that all communications with funding companies do not compromise the confidentiality of the attorney-client relationship, protecting sensitive information related to the legal strategy and case details.




Pre-settlement lawsuit funding can be a valuable resource for individuals facing financial difficulties during the course of a legal case. However, it is crucial for plaintiffs to carefully consider the terms, costs, and potential impacts on their settlement before pursuing such funding. Consulting with legal professionals and conducting thorough research on funding providers will help ensure a well-informed decision.


* JG Wentworth does not provide pre-settlement funding services. All leads are brokered to unaffiliated third party providers by Peachtree Funding Northeast, LLC.