Settlement Loan Myths – Don’t Be Fooled

Exploring the Top 3 Settlement Loan Myths
Settlement loan myths pervade the legal landscape perhaps mostly because settlement loans have many critics. Most oppose lawsuit funding to promote their own agendas such as tort reform, a reduction in insurance claims or restricted access to the judicial system. Because of this, it is necessary to dispel some common settlement loan myths.

Settlement Loan Myth #1 – Settlement Loans are for the Full Value of the Case
One common settlement loan myth is the idea that plaintiffs are giving up their entire lawsuit. Certain parties promote this myth by arguing that settlement loans, also known as lawsuit loans or legal funding, hinder settlement negotiations because the repayment of the loan would equal all or most of a plaintiff’s ultimate proceeds.

In practice however, this is simply not true. Settlement loans, are designed to advance only a small portion of the potential settlement – up to 12% of the subjective value of the case (as determined by conservative lawsuit funding underwriters).

Since all parties prefer settlement, limiting the amount of funding should leave ample room for settlement negotiations.

The design of settlement loans is not to eat up most of the recovery. This is simply a settlement loan myth. The real purpose of settlement loans is to give plaintiffs an opportunity to endure the litigation process without having to settle for a “lowball” settlement offer.

Settlement Loan Myths
Settlement Loan Myths

Plaintiffs must either settle the case or go to trial. Attorneys would much rather settle then to try a case if the offer is fair. This is true because anything can happen when a case is put before a judge and jury. If a plaintiff does not settle, counsel must either try the case or remove himself from the attorney client relationship. Neither of these is a desirable outcome for settlement loan companies.

Forcing a client to trial is the last thing an attorney or settlement loan company desires. E

Leave a Reply

Your email address will not be published. Required fields are marked *