What is Non-Recourse Lawsuit Funding?

Learn More About Non-Recourse Legal Funding

Getting injured as a result of the negligence of another person or entity gives you a legal claim for compensation.

Unfortunately, most personal injury cases take months to resolve, with many dragging on for years.

Many people find themselves unable to work while facing escalating medical bills and everyday expenses.

If you find yourself in this situation, there’s no need to feel like your life is sliding out of control.

Non-recourse lawsuit financing is not the right solution for everyone but can be a potential lifeline for those frustrated by the slow pace of personal injury litigation.

How Does Non-Recourse Settlement Funding Work?

Non-recourse lawsuit funding goes by many names, including settlement funding and lawsuit loans.

If you find yourself the plaintiff in a personal injury lawsuit, legal settlement funding might be a viable option to shore up your finances while awaiting your settlement. Legal funding is non-recourse in nature, which means that if you lose your case, you repay nothing.

Assuming the lawsuit resolves in your favor, your lawyer repays the pre-settlement funding from your settlement. The overall funding fee for this form of financing runs from 3% to 4% monthly. With fees and potential compounding, this can result in a fairly high percentage rate of 36% to 60% in the first year. When you consider that your lawsuit might take months or years to resolve, you could end up repaying double, or possibly triple, the money you borrow. Often, funding companies charge compound interest. Some companies, like Uplift Legal Funding, charge simple, non-compounding rates.

The Application Process

Once you have filed a personal injury lawsuit, you can apply to a lawsuit funding company for a cash advance on the strength of your potential settlement.

The lending company’s underwriters will evaluate your case to establish how much you are likely to receive if you win or manage to negotiate a pre-trial settlement with an insurance company. The majority of personal injury cases settle before trial.

The lender will offer you an amount of money as soon as the same day they receive case information from your law office. In return for this cash advance, you agree to pay the lender the principal plus a funding fee when your settlement or judgment arrives. You will not normally need to make a payment before you settle the case. The lender is then paid from the proceeds of the lawsuit settlement or judgment if you win, and is not paid at all if you lose.

Who Can Receive Non-Recourse Lawsuit Funding?

If you decide that lawsuit funding would help remove stress from your life at a challenging time, only take as much as you need as a cash advance. This form of financing can be expensive.

Anyone suffering a personal injury resulting from another person’s negligence is a potential candidate for non-recourse legal funding.

The stronger your case and the higher your expected settlement, the more likely you are to be accepted for settlement financing. This is unsurprising because the legal funding company only stands to recoup its investment if your case settles in your favor.

To qualify for lawsuit funding, you also need to satisfy the following:

• You must be represented by a qualified attorney.
• Your damages must be significant.
• You can demonstrably prove the defendant is responsible for these damages.
• The defendant has the means to pay a legal settlement.

How Does Non-Recourse Funding Differ from Recourse Financing?

Traditional financing, or recourse financing, must be repaid in all circumstances. Defaulting on recourse financing means the funding company can take assets from you or garnish your wages. It can also take legal action as a last resort. Accepting traditional financing means accepting the accompanying risk of repayment no matter what.

Non-recourse financing does not operate in the same way. A lawsuit funding company will only receive its pre-agreed portion of your settlement if you win your case and the lawsuit resolves in your favor. The money is taken directly from your compensation.

Another key difference is that non-recourse lawsuit funding does not require you to undergo a credit check. Your credit score is not taken into consideration during the application. You do not need to provide any proof of income or verification of employment, either. Beyond this, there are no up-front costs with non-recourse funding.

Expect to pay high overall interest rates for non-recourse funding. This reflects the considerable risk taken by lenders.

Financial Assistance After Your Personal Injury Settlement

The primary purpose of lawsuit funding is to help plaintiffs faced with lengthy waits for their litigation to work its way through the court system.

Lawsuit loans can also work for some people whose personal injury cases are resolved with a structured settlement. If you are receiving your settlement through structured payments, you may find that these payments do not cover your expenses. If this happens, you could be eligible for post-settlement non-recourse funding.