The average civil suit is a long, complicated, and drawn out affair that can take more than 1-2 years from start to finish. That’s time when you’ll be struggling to pay the mortgage if you’re out of work, unable to go on vacation because you’re worried about lawyer fees, and stressed about the outcome of your case. Instead of putting your life on hold while you’re waiting for justice to be served consider funding options like lawsuit loans to help make ends meet during the trial.

Why Would I Need a Lawsuit Loan?

Lawsuits are stressful and expensiveImagine this, you’re on your way to work and you get sideswiped by a truck that just ran a red light. Your car is totaled and you end up in the hospital with serious injuries. The insurance company of the guy that hit you wants to settle fast because they know that going to court will cost them a lot of money. But instead of settling you hire a lawyer and take them to court to get the money you deserve to buy a new car and pay your hospital bills.

While you’re waiting the years it takes for most personal injury cases to make their way through the courts, you’re not able to work because your injuries. Bills start piling up, you’re getting calls from creditors, and the stress of fighting the insurance company is affecting your health. You’re considering just settling the case to get it all over with.

Well, instead of settling for less than you deserve why not leverage the asset that is your court case to get the money you need now?

How is this Different from a Traditional Loan?

Also known as settlement funding, lawsuit loans are a type of funding that can help you to get the cash you need now without any risk.

Settlement loans are available to anyone who has an attorney and is currently in the middle of a civil suit. A funding company will review your case and generally make you a loan offer within 48 hours. No need for a credit or employment check. And the best part is, if you don’t end up winning your case you don’t owe the lawsuit lender a dime!

Litigation lending is a form of non-recourse funding which means that the only asset the lender has rights to is your suit winnings. So if you don’t win, or the other party doesn’t pay, you don’t have to worry about repaying the loan. All is forgiven.

With a traditional loan you are obligated to make your payments no matter what. So if you lose your job or have medical bills you’re having trouble paying it doesn’t matter, you must continue making your payments.

Issues to Consider When Looking for a Loanfund your court costs

When looking for a funding company there are some important points to consider to help determine which lender is best for you.

How Much Can I Borrow? The minimum amount you can borrow is typically around $1,000 and maximums can exceed $500,000.
Type of LawsuitWhile most lenders will fund loans for any type of lawsuit, some specialize. So when you’re looking for a lender make sure they cover the type of suit you’re involved in. Either check their website or speak with a customer service representative before filling out an application.
When is Payment DuePayment is due in full when your case is settled and you receive your settlement. You should not have to make any payments while your case is still on-going.
Credit Score and Employment VerificationUnlike most loans that require a credit check and employment verification, neither is necessary with a lawsuit loan. Your loan is based solely on the projected outcome of your case.
Customer ServiceWhen you spoke with the customer service representative were they able to answer your questions? Were they respectful and courteous? You’ll need to work closely with the settlement lender so you want to make sure you find one you’re comfortable with. If they fail to respond to your questions promptly and professionally that’s probably a sign you should look elsewhere.
Length of Time to Fund Your LoanSome lenders are able to fund your loan in less than 48 hours from the time you submit your application. You know best how long you can wait before you run out of cash so don’t be talked into a quick turnaround time in exchange for higher fees if you don’t need it. While 48 hours is generally the fastest loans can funded, most companies can complete the process in a week or less.
FeesReputable lenders do not charge application fees, or will waive the fee if you’re accepted for a loan. Be wary of structured settlement companies that ask for upfront fees, closing fees, or any other fee.
Do I need an Attorney?Before you’re eligible for a loan you’ll need to have an attorney. Your attorney will need to provide the lender with an update on the status of your case and will advise you on the best settlement funding option.

Why Are Lawsuits so Expensive?

Americans spend over $250 billion on lawsuits each year. Yes, you read that right, that’s over 2% of our GDP. You can read more about it here. There are a few reasons that Americans are such a litigious people:Court Costs

  • Access to courts is guaranteed. In many countries the average citizen doesn’t have the same access to the courts that Americans enjoy. Either the ability to file a suit is not guaranteed to all or it’s too cost prohibitive. Lower level courts, like small claims, are fairly inexpensive and most people can represent themselves.
  • We are a country that values the rule of law. Most Americans believe that if a law is on the books then it should be followed. If it’s not being followed then the courts are most people’s only recourse to fix the problem.
  • Each side pays their own expenses. Most countries have what is known as a “loser pays” system where the losing party must reimburse the other side for all their lawsuit related expenses. In the US that’s not necessarily the case. In most suits each side is responsible for paying their own expenses.
  • Lawsuits are exciting. With shows like Judge Judy, Judge Brown, Colombo, and all the others, the court system has been portrayed as an exciting place where justice is served. Unfortunately, those types of programs don’t show the months and thousands of dollars that go in to a case before it ever reaches a trial.

What Costs Can I Expect?

While the actual cost of a suit can vary widely they all share some of the same costs. Here are some of the typical types of expenses you should expect:

County Clerk FeesBefore you spend any money on your suit you're going to need to pay all the applicable court fees to get your case calendared. This will generally run you a few hundred dollars and will be one of you smallest expenses.
The SummonsAfter You've paid your court fees you and your attorney will deliver a complaint to the court. The complaint outlines your argument and explains why you believe you were wronged. The complaint must be delivered to the defendant which is usually done by the local Sheriff's department or a courier service.
The SubpoenasWhen you're building your case it may be necessary for your lawyer to subpoena witnesses for the trial. The subpoena is delivered by the Sheriff or a process server. You'll also need to pay for some of the witnesses travel costs and for their stipend.
Discovery PhaseDiscovery is when your case is made. During this phase of the trial your attorney will interview witnesses and gather evidence to make your case. This phase is expensive because you'll need transcription, to pay for travel and possibly lodging, in addition to all your lawyer's time.
Jury TrialIf you have elected a trial by jury then you'll need to pay each juror's stipend and possible travel and accommodation costs as well. Depending on the length of the trial this can add up fast.
MiscThere are a number of small fees you should be prepared for like additional filing costs, certifications, audio or video reproduction, etc. While individually the costs are small they can add up fast.
Lawyer feesBy far your biggest expense is going to be lawyer fees. Most attorney's charge hundreds of dollars an hour for their time meaning their bill will quickly reach the thousands or tens of thousands.

lost wagesThere are also other incidental expenses you should be prepared for:

  • Lost wages if you’re not able to work
  • Interest charges on your mortgage, credit cards, or other loans if you’re short on cash during the suit
  • Medical expenses
  • Property expenses, such as a damaged vehicle, boat, house, or anything else.

Minimize Lawyer Fees

Your biggest expense by far is going to be lawyer fees so before you hire an attorney it’s important to understand the different ways they charge. The most common options are flat rate, hourly, or contingency. You can read all about these three options here.

Whichever method you choose, here are some tips to help you reduce your costs:

  • lawyer time is expensiveDon’t keep them waiting. If your lawyer has requested information or documents from you then get it to them as fast as possible. They will charge you for every phone call and email reminder. When it comes to your case, time really is money.
  • Before meeting with your attorney make sure you know what is to be discussed so you can show up prepared. Any follow-ups because you weren’t ready are really going to cost you.
  • Keep your own case file. If you take good notes during your meetings and keep all applicable documents then you won’t have to ask your lawyer for anything. Minimizing communication really is the best way to save money.
  • Keep the relationship professional. The longer you work with your lawyer the more tempted you’ll be to share personal stories and information. By keeping your relationship professional you’ll cut down on the time spent at their office which will also save your cash.
  • Hire an expert. Make sure your lawyer is an expert in the field of your case. By limiting the amount of time they need to research case law you’ll save a lot on research costs. When interviewing attorneys make sure to find out what types of cases they specialize in.

What Type of Cases Qualify for Lending?

After reading about all the expenses related to filing a lawsuit you may be wondering how you’ll afford to see your suit through to the end. As mentioned above, lawsuit funding is available to anyone engaged in a suit with a good chance of winning. The following types of lawsuits are most often approved for funding:

Auto Accidents
Pedestrian Accidents
Motorcycle Accidents
Wrongful TerminationMedical MalpracticePersonal Injury
Boating AccidentsHarassmentNegligence
Construction AccidentsDiscriminationWork Injury

This is by no means a comprehensive list but should be enough to get you started.

What Can I Use the Money For?

use the money for necessary expensesLawsuit loans are not restricted solely to legal expenses. So while you’ll most likely be experiencing money issues as a result of your case you don’t need to use the money to pay your legal fees. You can use it to pay your mortgage, rent, credit cards, or anything else. There are absolutely no restrictions. What’s important is that you use the money so you’re not forced in to settling your case early for less money than you deserve.

How Do I Make Sure I Find the Right Lender?

Finding a lender is as simple as a Google search. However, you probably won’t want to work with the first one you find. Take your time and make sure to ask lots of questions so you end up with a company that will allow you to meet your goals.

Here are some basic questions you should ask every lender when getting started:

What type of cases do you fund?The first thing you want to find out is whether or not the lender will fund your type of case. Before asking any additional questions verify this.
Are you certified?Lenders should be certified in your state so make sure to ask for their certification number. You can then look it up with your local Secretary of State and check with the Better Business Bureau.
Do you have borrower limits?If you need $10,000 but the lender will only be able to offer $5,000 then you should find one who can provide all the cash you need.
What fees do you charge?Most lenders will charge a percentage of the loan amount but some may have other fees. Be on the lookout for application fees, closing fees, research fees, or anything else that may add to the cost of the loan.
How soon can you fund the loan?If you need the money within 48 hours understanding the lenders turnaround time is very important.

Structured Settlement Buyout

Find a Structured Settlement buyerIf you’ve already gone through the lawsuit and have a structured settlement that pays you monthly or annually there are funding options for you too. This type of settlement, sometimes also referred to as a structured settlement annuity, provides you with periodic payments over a predetermined period of time.

For example, you may have agreed to receive $1,000 per month for a period of 5 years. Depending on the amount of the payments, it may not be enough to cover your current expenses or for you to live off of, especially if the agreement was reached several years ago and your cost of living has increased. If you need more cash now you should look into structured settlement loans.

With a structured settlement buyout, a buyer buyer pays you a lump sum now in exchange for the rights to your recurring payments. While your recurring payments are probably a small amount of money, the lump sum cash payout can be substantial. Use the money to put a down payment on a house, send your kids to college, or take the trip of a lifetime. There are no restrictions on what you can do with the money.

Important Structured Payment Plan Considerations

If you’re considering accepting a structured settlement as a result of a lawsuit it’s important to consider the pros and cons of such an agreement before signing on the dotted line. The following table has some important questions to work through with your family, lawyer, and financial advisor before making your final decision.

What do you need the settlement for?Is the settlement solely to provide on-going living expenses or is it meant to cover medical costs as well? If you need the money to cover healthcare then a structured annuity might make a lot of sense as it ensures you'll always be able to make your payments. If the money is intended for living expenses it might be more beneficial to receive a lump sum payout you can use to purchase a house or invest.
What is the length of the payout?It's really hard for anyone to know what their life will look like in 5 years. Settlements that are longer than 5 years may seem great at first because you know you'll have guaranteed cash flow for the foreseeable future but you may find at some point that the payments don't buy as much as they used to.
How often are payments made?Are you paid weekly, monthly, or annually? Most people prefer monthly payments because they rarely have to worry about running low on cash. Receiving an annual payment is great in that you get a large payout all at once but unless you budget carefully you run the risk on spending it all in less than a year.
What happens if you pass on before receiving the entire settlement?Some, but not all settlements are structured to allow your heirs to continue receiving funds after you pass on. It's important to consider what will happen to your loved ones if they are no longer receiving the settlement.

How To Sell A Settlement

Most people are overjoyed when they receive that first settlement check. After what has most likely been a grueling and exhausting court battle they have time to relax and enjoy their lives. However, there may come a point when the settlement doesn’t provide the benefit it used to. Whether it’s because of inflation or cost of living increases, some look for ways to sell their settlements and receive a lump sum payment.

If this sounds like something you’d be interested in there are a few steps to get the process started.

  1. selling may be your best optionWhat do you need? Before you start looking for a buyer it’s important to know what you’re looking for. Do you want to sell all of your settlement or just part of it? Are you looking to start your own business or buy a house? Knowing what you plan to do with the money will help you find the right buyer.
  2. Find a buyer. The internet is full of ads for structured settlement buyers. The key is to find the one that will give you exactly what you’re looking for. Start by putting together a list of potential buyers after doing some preliminary research on-line or asking friends and relatives for recommendations.
  3. Ask lots of questions. Asking questions serves two purposes. First you’ll find out if the potential buyer is able to give you what you want. You’ll find the terms of the potential agreement and be able to compare it against other buyers. Second, you’ll find out if the buyer is serious. If they’re able to answer your questions quickly and efficiently that’s a good sign they’ll be able to process the sale in the same manner.
  4. Get a second opinion. Never settle for the first offer you get. Talk to multiple buyers to find the one that will meet your terms and complete the sale on a timeline that works for you.

For a more complete description of the sales process be sure to check out this resource.

So if circumstances require you to take out a loan remember to look for a reputable lender that has your best interests in mind and will take the time to answer your questions and provide you with the best option for you. Remember, you hold the asset they want so make sure you get the terms that are most beneficial to you.

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Charlie Verne

Charlie Verne is an accountant who lives in Ann Arbor, Michigan. Charlie started this site to educate people about the ways they can use their assets to improve their lives right now.

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