Most people think of case financing from the perspective of a plaintiff or defendant. This is understandable as those are the two most common positions in a lawsuit. However, there’s another side-the attorney. Attorneys can also finance cases where litigation financing comes into play.
There are countless benefits linked to litigation financing. However, some risks need to be considered. In this post, we’ll take a closer look at the rewards and risks of financing lawsuit expenses.
This way, you can make a more informed decision about whether or not litigation financing is right for you.
What Is Litigation Financing?
Litigation financing is when an outside source provides funding for a case in exchange for a portion of the winnings, should the case be successful. This allows attorneys to take on lawsuits they wouldn’t be able to afford otherwise.
There are many different types of litigation financing, but some of the most common include:
Case Insurance
Case insurance is when an insurance company provides funding for a case in exchange for a portion of the winnings. This financing is often used in mass tort cases or class action lawsuits.
Class action lawsuits are when a group of people files a lawsuit against a common defendant. Mass tort cases are similar, but they involve injuries instead of damages. Both cases can be expensive to prosecute, and case insurance allows attorneys to take them on without worrying about the cost.
Case Cost Financing
Case cost financing is when an outside source provides funding for the costs of a case, such as expert witnesses or court fees. The budget is provided in exchange for a portion of the winnings, should the case be successful.
This type of financing is often used in cases where the attorney believes they have a strong chance of winning, but the costs of litigating the case are too high.
Settlement Funding
Settlement funding is when an outside source provides funding for a portion of the settlement. This type of financing is often used in cases where the attorney believes they have a strong chance of settling the suit out of court.
The main advantage of settlement funding is that it allows attorneys to take on cases they wouldn’t be able to otherwise. This is because many attorneys are paid on a contingency basis, which means they only get paid if they win the case.
The downside of settlement funding is finding a reputable funding source can be difficult. Many companies claim to offer settlement funding, but few of them do.
Risks Of Litigation Financing
There are a few risks associated with litigation financing, but the benefits typically outweigh them.
Finding A Reputable Source Of Funding
This can be difficult. Many companies claim to offer finance, but few of them do. It’s crucial to find a reputable funding source before agreeing to anything.
The Amount Of The Fee
Litigation financing companies typically charge a percentage of the settlement, which can be a significant amount. It’s essential to ensure the fee is worth it before agreeing to anything.
Rewards Of Litigation Financing
There are many rewards associated with litigation financing, which is why it’s becoming increasingly popular.
Take On Cases You Wouldn’t Be Able To Otherwise.
This is because many attorneys are paid on a contingency basis, which means they only get paid if they win the case. With litigation financing, they can get paid even if they don’t win. It also allows attorneys to take on cases that might be too expensive to litigate otherwise. This benefits the attorney, the client, and the justice system.
Get Paid Upfront
Litigation financing companies typically provide funding within a few days so that attorneys can get paid sooner. This is important because many attorneys are paid on a contingency basis, which means they only get paid if they win the case.
Focus On The Case
Since the funding is provided upfront, attorneys can focus on the case instead of worrying about the costs. This is important because it allows attorneys to devote their full attention to the case, increasing the chances of winning.
No-Risk
If the case is unsuccessful, the attorney does not have to repay the funding. This is because most litigation financing companies only require repayment if the case is successful. As such, there is no risk for the attorney.
The Bottom Line
Litigation financing is an excellent way for attorneys to take on cases they wouldn’t be able to otherwise. It also allows them to get paid upfront, which can be helpful if they are paid on a contingency basis. While it’s a great way to finance a lawsuit, it’s essential to be aware of the risks involved. These include finding a reputable source of funding, the terms of the agreement, and the fee amount.
Hence, it’s essential to understand the risks and rewards associated with litigation financing before agreeing to anything. Only then can you make an informed decision about whether or not it’s right for you.