Pros and Cons of Pre-Settlement Funding

Pre-settlement funding can be a valuable financial tool for plaintiffs, but it's important to understand both its benefits and drawbacks. This article examines the pros and cons of pre-settlement funding to help plaintiffs make informed decisions.

Pros of Pre-Settlement Funding

1. Immediate Financial Relief
   • Plaintiffs receive quick access to cash, helping them cover urgent expenses like medical bills and rent.
2. Non-Recourse Funding
   • Repayment is only required if the plaintiff wins or settles the case, eliminating the risk of debt if the case is lost.
3. Focus on Recovery and Legal Strategy
   • Financial stability allows plaintiffs to concentrate on their health and legal proceedings, potentially leading to better case outcomes.
4. Avoid Low Settlement Offers
   • With financial support, plaintiffs can resist pressure to accept low settlement offers out of desperation.

Cons of Pre-Settlement Funding

1. High Costs
   • Pre-settlement funding can be expensive, with high fees and interest rates that can significantly reduce the plaintiff's final settlement amount.
2. Impact on Settlement
   • The funding company's repayment, including fees and interest, comes out of the settlement, which may leave the plaintiff with less than expected.
3. Risk of Predatory Practices
   • Some funding companies engage in predatory practices, charging excessive fees or offering unfavorable terms.
4. Legal and Ethical Considerations
   • The involvement of pre-settlement funding can complicate legal proceedings and raise ethical questions, particularly regarding attorney involvement and client consent.

Conclusion

While pre-settlement funding offers immediate financial relief and other benefits, it also comes with significant costs and potential risks. Plaintiffs should carefully weigh the pros and cons and consult with their attorney before deciding whether to pursue this financial option.