Settlement Cash Advance
Do not confuse a settlement cash advance with other types of advances in the legal field. A settlement cash advance is entirely different from borrowing money against a pending case. At LawLeaf we offer both.
Where did the term settlement cash advance come from?
A settlement is a resolution of a dispute between two parties without the need for a legal trial. The two parties may resolve it through a settlement claim or through lawsuit settlement. A settlement claim occurs when a dispute is resolved before a lawsuit is filed and a lawsuit settlement is resolved after a lawsuit is filed and usually before a trial.
A cash advance is a lending tool that allows a person to borrow money against an asset. In terms of the legal field the asset is the future award from a settlement or judgment. A settlement cash advance is simply an advance against a case that has already settled.
How is this different from borrowing against a case that is not settled?
There are several differences for both the plaintiff and the lender. The first difference is the stage of the case. When an investor considers lending money against a case they always look at two very important aspects of that case. There are two important questions they may ask themselves. Do they believe the case will settle or the borrower will have a favorable ruling? Does the defense have the means of paying the settlement?
If you have followed the industry you may have heard the term betting on lawsuits. When a company provides capital against a pending case, they are betting the applicant will have a favorable result. If they did not believe the plaintiff would win the case, they would not provide the advance. This is where the difference between the two is better understood. Lawsuit cash advances are provided based upon the strength of a case. The stronger the case the better the rate.
If a case is already settled the risk of losing the investment is greatly reduced by the lender. Because the risk is greatly reduced and in some cases taken out of the equation, it should mean a lower rate for the client. The major difference for the lender is risk and the major difference for the borrower is rate.
Why do companies use interchanging terms to describe the industry as a whole?
There are many different terms that are used within the industry. Some of the terms mean the same while others are different. Lawsuit funding is the most common term that is used within the industry. This term describes both before and after a settled lawsuit. A settlement cash advance is commonly referred to as a settlement loan or post settlement funding. These terms describe a cash advance against a settled case.
There are other terms such as legal financing and litigation financing which means an advance for legal and litigation fees. There are dozens of companies that may specialize in one area or another. For instance, there are large funds that are set-up to provide litigation financing while others only focus on settlement cash advances.
Do I need an attorney even though my case is settled?
In order to qualify for a settlement cash advance you must have an attorney. The main reason is collecting after the case is paid. A company that offers a cash advance on a settlement will make it mandatory for the client to sign a contract. This contract will serve as a lien on the case. This lien is a legally binding contract that assures the company it will be repaid if and when the client receives compensation. A company will also ask the attorney to sign the contract assuring when he or she receives the settlement check, they will be responsible for cutting a check to the lender.
Why do plaintiffs apply for settlement cash advances?
The main reason why a person will apply for a cash advance against their settlement is because they can’t afford to wait. A settlement may take 30, 60, 90 days before the compensation is paid. In some cases it could even take longer. If a person has an emergency and needs financial assistance they may consider a settlement advance.