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How Could Pre-Settlement or Post-Settlement Funding Help You?
The US judicial system allows individuals to seek justice for the wrongs and losses they’ve experienced. Through a civil tort, victims may recover monetary damages to pay for medical costs, lost wages, and other expenses they’ve incurred due to the harm done to them. Unfortunately, the legal process for resolving these cases can extend for months or even years.
Both pre-settlement and post-settlement funding can provide financial support to plaintiffs involved in civil lawsuits. These types of legal financing may allow individuals to withstand a longer court case so they can recover the full damages they are entitled to. Although there are some similarities between pre-settlement and post-settlement funding, they are used at distinct times for different purposes. An experienced settlement funding firm can explain the key aspects of each type of funding so you can determine which one may be right for your unique situation.
What is Pre-Settlement Funding?
Pre-settlement funding provides a cash advance on an anticipated settlement in a civil case. This variety of funding is disbursed to the plaintiff while the case is still ongoing. It can be used to pay attorney fees, monthly bills, medical treatment costs, or other vital expenses. Unlike traditional bank loans, pre-settlement funds do not require the recipient to make monthly payments.
Instead, the funds and any associated fees are repaid in a lump sum when you receive your settlement.
Who is Eligible for Pre-Settlement Funding?
Plaintiffs represented by an attorney in an ongoing civil lawsuit where they can reasonably expect a settlement from the defendant are eligible to apply for pre-settlement funding. When determining whether to approve your application, the funding firm or company will speak to your lawyer and look closely at the merits of your case. Not all cases will qualify for pre-settlement funding, but the likelihood of obtaining financing is highest for individuals with strong claims. If your application is approved, you will receive a portion of your anticipated settlement in as little as a few days.
What Are the Pros and Cons of Pre-Settlement Funding?
As with any financial transaction, there are advantages and drawbacks to seeking pre-settlement funding. Before making your decision, it is crucial to discuss all your alternatives with a lawyer or trusted settlement funding firm. Gathering information ensures you understand your options and any risks involved.
Pros of pre-settlement funding:
- Can be a good option for those with below-average credit: Applicants are judged on the merits of their court case rather than their credit scores, employment, or other metrics.
- Carries less risk for the recipient than traditional loans: Pre-settlement funding is provided as a non-recourse loan. The funding company is taking on all the risk, and you will only be required to repay the loan if you receive a settlement.
Cons of pre-settlement funding:
- Can have high fees and costs: All pre-settlement funding offers will include information about interest and fees. Different states have varying regulations, but the Illinois Consumer Installment Loan Act caps the maximum annual APR at 36%. Be sure you fully understand the total cost of receiving an advance on your settlement before signing the paperwork, and don’t be afraid to ask questions if something is unclear.
- Has limitations: Not all cases will qualify for pre-settlement funding. For approved applicants, the percentage of their anticipated settlement they can receive through funding is usually limited to 15% to 20%.
What is Post-Settlement Funding?
For some plaintiffs, winning their civil lawsuit and being awarded a settlement does not necessarily mean their case is completed. There may be a gap between the case’s conclusion and the receipt of their settlement funds. This delay is more common in certain types of cases, such as:
- Class-action lawsuits
- High-value settlements
- Claims with complex or lengthy settlement processes
Post-settlement funding can help bridge the gap between the end of the court case and the actual disbursement of the settlement sum. The advance on the pending settlement provided by post-settlement funding can help plaintiffs handle any outstanding or immediate bills while they wait for the legal process to conclude.
Who Can Apply For Post-Settlement Funding?
Post-settlement funding is very similar to pre-settlement funding. The main difference is the timing of the application. A plaintiff must have already reached a settlement agreement with the defendant to apply for post-settlement funding.
A funding firm will consider the awarded settlement amount and the timeline for its distribution when determining an applicant’s eligibility and the amount they may receive through post-settlement funding.
What Are the Advantages and Disadvantages of Post-Settlement Funding?
One positive aspect of post-settlement funding is the increased likelihood of approval compared to pre-settlement funding. Since the case has concluded and the settlement contract has been signed, funding companies have more concrete numbers to evaluate. The funding sums may also be higher post-settlement for this reason. Another advantage is that the funds are provided as a non-recourse loan, which you are only required to repay once the settlement is received. If the defendant ultimately does not pay, you will not be responsible for paying off the loan.
However, the biggest disadvantage of post-settlement funding is the effect it can have on your final settlement. The fees and interest may significantly reduce the balance of the funds left for you from the settlement, especially after paying your attorney and any medical liens. A responsible funding business will provide complete information on the sum you will be required to repay if you choose to accept their post-settlement funding offer. It’s essential to weigh these considerations with the urgency of your current financial needs.
How Can an Experienced Funding Firm Assist You?
Pre-settlement and post-settlement funding may provide important resources for plaintiffs needing financial assistance at different stages in their lawsuits. However, it is vital to perform your due diligence and thoroughly evaluate all the funding options available in your situation. If you have any questions about settlement funding and whether it may be suitable for you, our skilled team at Blue Fox Funding, LLC is here to help. Contact our office today for a free funding evaluation: (618) 350-4581.
