According to the US Bureau of Justice Statistics (BJS), only about 5% of cases involving personal injuries go to trial. The rest end up in a settlement, with the defendant accepting to pay a certain amount of money to the plaintiff over a specified period. Because settlement matters fall under the jurisdiction of civil courts, each party has the legal right to hire an attorney for representation. Other than the retainer fee, your attorney will also require a contingency fee in case you win the case and receive a settlement. The bad news is that it may take anywhere from weeks to years to receive the award for damages after the case is settled. This is where legal loans for a settled lawsuit case come in handy.

Here is more information and an in depth guide about this topic below with a table of contents covering:

1. What is pre-settlement funding?

2. Who needs and benefits from a legal loan once a case is settled?

3. Who is eligible for post settlement funding

4. Benefits for post settlement funding

5. How to get started if you want cash now

What is Post-Settlement Funding?

Regardless of how long it takes to receive the award from the defendant, you will still need funds for your every day expenses and law firms need money to run their law practice just like JG Wentworth needs money for TV commercials enticing you to sell your payments. If you’re an attorney, pay the contingency fee if you are the plaintiff, pay bills, and generally keep your life moving. This can be difficult if you don’t have finances. As a result, your bills may pile up and put your mental health and wellness in jeopardy. Also known as pre-settlement legal funding or cash for settlement, post-settlement funding is the financial support you receive from a lending company to cover the expenses that may arise as you wait for the defendant to compensate you. For instance, instead of closing your law firm for 10 months due to a lack of finances, post-settlement funding can help keep your business afloat until the award for damages comes. That said, common cases that require post-settlement funding include, among others, product liability cases, traffic accidents, workers’ compensation cases, medical malpractice, and errors and omission cases.

Who Needs Legal Loans for Settled Lawsuit Case?

While receiving a lump sum of money from a lending company may sound like a good thing, you should first evaluate yourself to determine whether this loan is necessary or not. Although the risk may be low for you, the back and forth that may arise in case the defendant defaults or the insurance company denies the claim can be time-consuming and tiresome. In case you are in good physical and mental health after the settlement of the case, you can consider going back to work and paying for the contingency fee out of pocket if you can. This way, you will have all the money to yourself when the insurance company pays the award for damages. However, you will have to find alternative financial support if you are not healthy enough yet to resume working. In essence, you should opt for post-settlement funding if:

• You need quick cash after the settlement, specifically 24 hours after application
• You are an attorney who operates on contingency payments
• You are a plaintiff who wants to pay debts and settle bills
• Your attorney is not willing to wait for the settlement to come before receiving the contingency fee
• You are still too weak to go back to work

Eligibility for Post Settlement Funding

Unlike pre-settlement funding which requires stringent underwriting measures considering the outcome of the case is unknown, it is easier to qualify for post-settlement funding. It is worth noting that to become eligible for legal loans for settled lawsuit cases, you just need to meet the following criteria:

• Be the plaintiff, not the defendant
• Be an attorney representing the plaintiff
• Must have had a successful compensation claim
• The settlement must be in the form of money

How to Apply for Legal Loans for Settled Lawsuit Cases

Once you are eligible for legal loans for settled lawsuit cases, you should then gather the necessary documents for the application. Some of the documents that the lending company typically required include:

• A letter from your attorney indicating the amount of damages

• The amount of post-settlement funding you wish to borrow

• A letter that your attorney sent to the insurance company reminding them of their obligation to settle the claim

• Copies of the executed general release

An attorney can still help you collect these documents and guide you through the application process as needed. Take note that the required documents may vary from one lending company to another, and hence, be flexible enough to provide additional documents as needed. Apart from providing these documents, the lender may ask you to complete a form in the application process. Approval usually takes 24 hours although this can also vary depending on the lender you choose.

Benefits of Post Settlement Funding

Like earlier said, you should only apply for a post-settlement loan if you are in dire need of financial support. Even so, post-settlement funding comes with a myriad of benefits that should compel you to apply for it. They include, among others:

• Quick turnaround time — While loan approval can be quick, it may take some time before the lender disburses the funds to the borrower. On the contrary, post settlement lawsuit loans only take 24 hours from application for the funds to reflect in your account. Even better, some lenders disburse the funds in just 12 hours.

• Easy underwriting process — Considering the outcome of your civil case is already determined, the lender’s risk on post-settlement loans is significantly reduced. As such, the underwriting process is usually non-stringent since winning the case is the greatest determinant. Here, the lender won’t review your income, credit history, or your creditworthiness.

• No monthly payments — Unlike pre-settlement funding which requires you to pay a monthly interest as the case progresses, post-settlement loans don’t require this. Instead, you will only pay interest once the settlement comes. Even so, this can vary from one lending company to another. In fact, some lending companies charge up to 4% interest per month on post-settlement loans.

• No risk — Since the settlement is the collateral, in this case, there is no risk for you as the borrower.

• Available in recourse and non-recourse options — According to the Forbes Advisor, most lenders offer non-recourse options in post-settlement funding although you can still choose the recourse one if you are okay with it. Typically, the non-recourse option greatly lowers your risk since in case the defendant defaults, the lending company will only go after the collateral, in this case, the settlement. In other words, the lending company will go after the settlement financing entity such as the insurance company.

• Provides financial help — Depending on the severity of the injury, it may take anywhere from weeks to years for you to go back to work. With a late claim settlement and no source of income, you may encounter tough financial hurdles that may cause your health to deteriorate. Usually, the defendant is supposed to pay some money upon settlement of the case and pay the rest later. Considering there are no stringent rules on when the rest of the payment should be made, you need to find an alternative source of income as you wait for the award. Luckily, post-settlement funding can enable you to get by as you wait for the insurance company to settle your claim. In case you are a lawyer, this loan will enable you to continue running your business before the contingency payment comes.

• Convenient — Because of the easy underwriting measures, quick approval, short disbursement time, and no risk, post-settlement lawsuit loans are not only reliable but also convenient.
How to Spend Legal Loans

Once you receive the post-settlement legal loan, how you spend it entirely depends on you. This means that you can choose to go on vacation, buy new clothes, shop for groceries, or even contribute to charitable events. It is prudent to spend this money wisely considering you will use your settlement award to repay it. If you can get by comfortably without external financial assistance, you should consider avoiding this loan. This way, you will have more money to spend when the insurance company settles the claim. Here are some suggestions on how to spend the money wisely.
• Pay any outstanding debts, including the attorney’s contingency fee

• Pay rent upfront, especially if you won’t be able to go back to work soon
• Pay bills
• Start a business to complement your income

Differences Between Pre-Settlement and Post Settlement Lawsuit Loans

Basically, post-settlement lawsuit loans are similar to pre-settlement loans considering they both provide financial support to plaintiffs and their attorneys. Even so, there are some differences as discussed below.

• Time offered — Pre-settlement lawsuit loans are the cash advance given to attorneys and plaintiffs when the court has not yet resolved the case. This cash advance is meant to help the plaintiff and the attorney to pay legal expenses as well as personal bills. On the other hand, post-settlement loans are offered once the case has been resolved and the defendant has agreed to compensate the plaintiff. This loan also gives financial support to the borrower during the waiting period before the award for damages is settled by the defendant’s insurance company.

• The risk involved — If you are the plaintiff or the attorney, the risk involved in both pre-settlement and post-settlement lawsuit loans is zero. This is because the lender will not come after your finances and properties even if the defendant defaults repayment. Even better, in case you lose the case, you won’t have to repay your pre-settlement loan. While this is good for you and the attorney, it leaves a bigger risk to the lending company. More specifically, in case you lose the case to the defendant, the lending company will lose the pre-settlement finances they offered you as well as any additional costs they incurred. If the defendant’s insurance company also denies the claim, the lender will also suffer financial loss. On the other hand, the risk is a bit lower for post-settlement loans considering you’ve already won the case.

• Interest rates — Due to the high risk involved in pre-settlement lawsuit loans, the funding company will most likely charge you a high-interest rate. While a 3-7%% interest per month may seem fair, this can translate to as high as 60% per year for some funding companies. Considering some tort cases may take years before settlement, you will have paid a huge amount of money by the time the settlement comes. On the contrary, interest rates on post-settlement loans are generally lower. In fact, most lending companies will only require you to pay a one-time interest amount on top of the loan once the settlement comes.

• Underwriting measures — Because of the high risk involved, the underwriting process of pre-settlement lawsuit loans is typically stringent. For instance, since you won’t repay the loan even if you lose, the funding company is more likely to fund you if you prove that your winning odds are high. On the other hand, post-settlement lawsuit loans are generally easier to get since the lending company only faces a low risk. In other words, the underwriting process for post-settlement loans is shorter and less stringent.

How To Get Started With a Legal Loan for Your Settled Lawsuit Case

That’s everything you need to know about legal loans for settled lawsuit cases. Take note that you can also apply for pre-settlement lawsuit loans if you urgently need financial support before your case is settled. Nevertheless, you must be sure that the court will settle the case in your favor before applying for this loan. Considering the high risk involved in pre-settlement lawsuit loans, be ready to pay high-interest rates and other costs.