How Attorneys Avoid Lawsuit Funding Problems
Injured clients often ask attorneys for advances on their injury lawsuits. In some instances, injuries cause financial strain. Other clients simply “heard it from a friend” that attorneys give money to clients once they are retained. Unfortunately, most states prohibit this practice.
Enter into the equation the lawsuit funding industry – you know, the guys called “legal loan sharks”. The insurance industry portrays funding companies as a scourge on the legal landscape. Yet the need for financial help still exists and in a market economy, entrepreneurs compete to fill this need. Below, we summarize the lawsuit loan process and offer suggestions on how attorneys avoid lawsuit funding problems.
Lawsuit Funding Scenarios
Clients ask their attorneys for money if times are difficult, like when injuries prevent them from working. Most state ethics rules prohibit attorneys from advancing money to their clients. So when a client needs money, they apply for lawsuit funding.
Clients use lawsuit funding for all sorts of expenditures. Rent, food, utility bills, college tuition, child support, car payments and even surgical procedures can all be financed through selling a portion of the future recovery.
The Process
Once a funding outfit is contacted, an application is taken. The required paperwork is then sought from the attorney and his/her staff. Once the documents are compiled, the attorney must then conduct a short telephone interview with a lawsuit funding “underwriter” before the application is approved for funding. Once approved, the attorney must sign off on the agreement and acknowledge there has been a transfer of property rights in a portion of the case’s future proceeds.
Unfortunately, the lawsuit funding process demands that a law firm devote resources to an endeavor that may or may not ultimately increase the firm’s revenue. Sometimes lawsuit funding transactions give clients the staying power to reject “low ball” settlement offers. This gives clients the financial wherewithal to seek better offers and increases the firm’s fee. Unfortunately, not all funding deals have this positive effect on the firm’s bottom line.
Because lawyers only have their time to sell, any time spent in unproductive endeavors are resisted. Gathering paperwork and fielding calls from funding companies are placed in this category. It is easy to see why lawyers are torn between trying to help their clients and the efficient management of their practice.
Underwriting Subjectivity and Attorney Response
Although many clients face similar financial pressures during their lawsuits, it is equally true all lawsuits are different, each with its own set of facts and circumstances. This fact poses additional risk for funding companies because underwriting this risk is extremely subjective. And this subjectivity means that even though one lawsuit funding enterprise considers a lawsuit “fundable”, another may not.
Some lawsuit funding applicants are declined only to be later approved by another funding outfit for the same case. This uncertainty is simply one characteristic of a dynamic business model.
Would it not be advantageous for clients to have their attorneys minimize this uncertainty while securing the best funding deals possible? Considering the value of an attorney’s time, would it be in the best interest for the attorney to negotiate a deal only ONCE, thus securing the best possible terms. This just might be how attorneys avoid lawsuit funding problems.
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Settlement Funding Can Be Easy
Like it or not, lawsuit funding has become a part of personal injury practice. Attorneys would do well to accept that lawsuit funding fills a present need in their clients’ lives and learn what attorneys should know about lawsuit loans. Not only does support staff waste less time, but attorneys avoid lawsuit funding problems automatically.
Minimizing the Intrusion
As mentioned above, attorney participation is a prerequisite to any lawsuit funding deal. The good news is that much of the time spent on the process can be minimized through the use of some proven strategies. These will virtually eliminate the time your staff must devote to the funding process, while assuring your clients the best possible terms for funding.
If there were proven strategies to dealing with lawsuit funding companies, wouldn’t you want to know them? What if this approach greatly limits the amount of time your staff devotes to the process and limits your personal interaction with underwriters? Would you also want to know how using this approach will give your clients the best deals in the business?
Making the Connection
Attorneys avoid lawsuit funding problems when they foster relationships with established lawsuit funding enterprises. This company should have the client’s interests in mind because in the lawsuit funding business, attorney satisfaction is an integral part of the business’s growth.
How to Foster this Relationship
Creating a working relationship with a lawsuit funding company is as easy as 1-2-3.
- Contact a lawsuit funding company about their programs and make sure you get at least a ball park estimate of the costs. These include process fees, underwriting fees, application fees, and origination fees, if any. Attorneys should ask questions about lawsuit loan rates, how the advance is amortized, when repayment is expected and what exactly are the attorney’s obligations under their typical agreements.
- Establish a working relationship wherein you refer clients to the funding company, who in return, pledges prompt and efficient service, as well as complete transparency in how the company works and what is to be expected from all the parties involved. This step allows attorneys to avoid lawsuit funding problems and ensures that if concessions must be paid in the interest of settlement, they will be approved in short order. It also develops a scenario where lawsuit funding increases the firm’s revenues without the firm having to make any additional expenditures. An example of this involves surgical lawsuit loans.
- Abide by the terms of the agreement if at all possible. If a problem arises, talk straight to your contact at the company. Lawsuit funding is an investment business. Investors are normally more concerned with the return OF their capital than a return ON their capital. If a compromise can be made in the best interests of all parties, then negotiate same with transparency and integrity.
Attorneys Avoid Lawsuit Funding Problems – Getting Started
If you have any questions whatsoever about how attorneys avoid lawsuit funding problems or need any information regarding lawsuit loans in general, please contact us online or give us a call.
Attorneys avoid lawsuit funding problems by understanding lawsuit funding as a business and using this knowledge to their advantage. If lawyers put forth honest effort and establish a healthy working relationship with a lawsuit funding company, the rewards will greatly outweigh the time spent in pursuing the connection.
Thank you for your interest in the lawsuit funding business.
