Legal Funding: A Loan or an Investment? Part Two
If legal funding is not contingent on the results of the case, there is now a lawyer contingent fee. Legal funders as well as lawyers working on this type of case do not get paid until the litigants do. However, some argue that hypothetical contingencies are not enough. There must be a substantial risk that might not occur for another event to be really contingent. An agreement to pay back the lawsuit loan is not really contingent if it is conditioned.
Legal funding companies invest only in cases they believe to have great chances of winning. Some argue they are not taking on any substantial risk needed in order to make an obligation contingent.
True Contingency
Lawsuit funding is a true contingency. Most funding companies report rates well over rates for other forms of loans. These are the reasons why legal financing is far from uncertain:
1. Most litigants seek legal financing assistance right after an accident. Investing in early cases is more unpredictable than investing in them later on. The facts of the case have not developed yet.
2. The case’s value is dependent on the extent of the sustained injuries. Legal funders run the risk of investing in cases dependent on an injury from the negligent party.
3. Legal funders have no control over a case. Litigants can decide to settle for a smaller amount or may decide to drop any meritorious claims for several reasons. This is the same as being a minority shareholder in a small company, where it is a position that most investors dislike due to lack of overall control.
4. Lawsuit funding companies are not always the first to be paid after a successful case. Litigants may be experiencing bankruptcy, may have medical bills, may owe child support, and more. Professional fees, legal fees and lawyers’ fees are paid first.
5. Litigants, who win their case, have no guarantee that they are going to collect the money. Some end up with nothing because they are already bankrupt.
This type of legal financing is riskier than any other traditional loans. Defending a lawsuit only makes sense if the party thinks they have a high chance of winning or have a greater chance of getting a more reasonable settlement. If the plaintiff has no risk of losing, the defendants would not gamble time and money on various legal fees. They will simply choose the settlement as soon as possible in order to avoid any hassle. Pegasus Legal Funding does not offer a “lawsuit loan,” lawsuit loans, pre-settlement loans, or a pre-settlement loan; however, we offer non-recourse lawsuit cash advances. If you would like to find out if you qualify for a legal funding…
Submit an online application or call today for a free evaluation
855-FUND–YOU / 855-386-3968
.:About the author:.
James Sheridan is the Contracts Manager at Pegasus Legal Funding LLC and is responsible for the final stage of the funding approval process. James focus and priority is delivering to PLF’s clients the funds they need as quickly as possible
Author:James Sheridan