Legal Financing

Written by Michael O'Brien
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Legal financing can be a problem when money is in short supply for a court action. This can be particularly true in personal injury situations when someone's livelihood is in jeopardy. A funding can be obtained from legal financing firms that specialize in providing cash advances for legal matters. How do such organizations operate, though?

Legal Financing Questions

Obtaining money from a legal financing firm isn't the same as obtaining from other sources like banks or credit card companies. Legal funding companies place what is called a lien on your case. This means that ownership of any potential award to you belongs to them. For example, if you obtain $20,000 and win $40,000, then $20,000 of that amount, plus any interest accrued is automatically earmarked for the legal funding firm.

The interest rates on the funding are where legal funding companies make their money. It's important to shop around for companies that have reasonable interest rates. If you're paying more than eight percent, then it's way too much. A good legal funding company can charge lower rates because of volume business from steady attorney referrals. Such referrals also mean you know you are dealing with a trustworthy company.

Some legal funding firms also offer an incentive program to lawyers. Attorneys can receive a commission from every referral they provide. This is not only meant to keep business coming in for a funding company, but to provide a network of lawyers the firm knows it can trust. Legal fundings aren't given out casually. It needs to be established that the case has a good chance of winning and that the attorney has a proven track record.

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