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Month: April 2019

Factors that an In-House Counsel Must Be Aware of Litigation Financing

April 28, 2019 by George Hamlet Leave a Comment

Litigation Financing

Litigation financing is also known as legal financing, settlement funding, Legal Funding, professional funding, lawsuit loans, and third-party funding. It is the procedure through which law firms or litigants can finance their legal actions or other costs through a company that offers legal financing. Settlement funding is more like legal defense finances in which companies provide cash for lawsuits. Lawsuit loans are usually used by people who are not financially stable. The difference is that defendants use legal defense funds whereas plaintiffs use legal funding. You can find out more about the various ways to get access to litigation financing by browsing online.

Comparison between defense funds and lawsuit loans
You can use the money you received for any purpose whether for personal necessities or litigation. On the contrary, money obtained from legal defense funds can only be used for legal actions or legal costs.

Popular and authorized funding companies present nonrecourse credit to litigants in exchange for a portion of the share to be received for settlement of the case. Even though it has some apparent connection with unsecured loans taken from traditional lenders, legal funding operates differently from a general loan. Litigation funding is usually not regarded as a loan but is considered as a form of an asset purchased or venture capital.

Roles of third-party funding companies
Companies that offer legal funding to litigants generally provide financial help in the form of huge sum, and the person does not need to have a specific account for this loan. There are a lot of risks involved in this process in part of the third party funding company. If a situation arises that the case proceeds to trial and the complainant loses, the funding corporation does not receive anything and lose the money they have invested in the case.

It means that if the accuser loses the case, he is not responsible for paying off the debt. Plaintiffs also are not needed to pay monthly installments after receiving litigation funding. Also, the complainant is not required to pay any money until the case settles or judgment is provided. The procedure may continue for months and even years after the legal finance are provided. Therefore, to qualify for getting lawsuit loan from a reputed settlement funding company, your case must be strong enough to enable a corporation to consider investing worth the risk.

Responsibilities of the complainant
Professional funding companies neither provide legal counsel to claimants nor do they give recommend you to attorneys. Their job is to invest money in your case if they are confident about it. Accordingly, to meet the requirements for legal funding, an applicant must have already hired an attorney. To apply for settlement financing, the plaintiff will also have to fill the application form and provide supporting documents to it.

Lawsuits are high-priced and may take a lot of time to settle which may extend for several months or years. During that time, many claimants may experience financial stress and may require money to forfeit the costs of the court case, as well as the expenses of supporting themselves.

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