Lawsuit Funding – Not Always A Good Idea

I do not like “Lawsuit Funding.” I understand its appeal, I do not like what I have seen. Best advice is to seek money or loans from all other sources before considering the Lawsuit Funding industry.

Let me get this off my chest. I do not like “Lawsuit Funding.”

I understand the appeal of the offer of money now instead of down the road when a settlement or verdict occurs. I understand the economic pressure on my injured clients, especially those who cannot owrk.

But, I have seen Lawsuit Funding “up close and personal” as they say. And I do not like what I have seen.

An entire industry has developed to provide what is called Lawsuit Funding. The ads appear so regularly that the concept is made to appear as normal as obtaining a mortgage on a home. Many Bar Associations have declared that Lawsuit Funding, if structured correctly, can occur. However, the fact that it can occur does not mean that it should occur.

My experience with this relatively new concept has taken me to these conclusions:

1) Tony Soprano or any other Mafia boss would probably charge less interest.

What this eventually means is that an injured person actually receives considerably less net recovery from a claim. A $5,000 loan can end up requiring a $15,000 (or more) repayment. Honest.

2) A client will likely make less prudent decisions regarding the settlement or trial of a claim once there has been a Lawsuit Funding loan.

Once the loan proceeds have been received a client tends to “forget” that this sum and the interest charges will have to be deducted from the settlement or verdict in the case. When a later settlment offer is converted to a net recovery figure (after all deductions, including the repayment of the loan and interest) it never looks as large or fair as it should. As a result, even a very fair settlement offer does not get the consideration it requires.

3) The attorney for the injured party feels ever increasing pressure to resolve a matter as soon as possible.

It is impossible for an attorney not to be aware that a delay in a trial date or a mediation conference or even in the negotiation process is likely to be costing a client $1,000, $2,000 or more per month in mounting interest charges.

Best advice I can give to a client is to seek money or loans from all other sources before considering the Lawsuit Funding industry. Then, if a Lawsuit Funding loan must be obtained make it for the smallest possible sum.