Pre Settlement Funding

Written by Patricia Tunstall
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Pre Settlement Funding Fills a Need

Pre settlement funding is the business of investment groups that view a plaintiff's claim as an asset, and, therefore, a potential investment for interim funding. Although this approach has its opponents, it is growing in importance and influence in the legal system. This is basically a market perspective on claims and lawsuits, and since this outlook is becoming more popular, it must tap into some need or vacuum in the legal system.

Ultimately, this mushrooming business approach is having the same effect as contingency fees when they became prevalent in the United States in the late 1800s. Factory worker injuries were commonplace and often severe in the industrialized society of the 19th century. Poor, uneducated, and without resources to turn to, these workers were unable to even think about filing a lawsuit against giant corporations.

Contingency Fees Enabled Lawsuits

Lawyers began to take cases on a contingency basis, that is, the plaintiff did not have to provide money up front, and the lawyer paid court expenses as they occurred. Today, a contingency fee for an attorney is around 33-40% of any settlement or judgment, but the plaintiff owes nothing but the expenses to the lawyer if the case fails. In other words, even a poor plaintiff can hire a lawyer to file a lawsuit on a contingency basis.

Pre settlement funding by modern third-party companies also enables lawsuits to go forward that would otherwise be dropped because of a lack of litigation financing. By intervening financially in lawsuits, these companies permit plaintiffs to proceed to obtain damages from the defendant who injured them in some way. Both contingency lawyering and outside pre settlement funding sustain claims that would otherwise not go forward.

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