Can Lawyers Lend You Money? Here’s Why They Can’t

If you’ve ever faced a financial struggle during a lawsuit, you might wonder: Can your lawyer lend you money to help cover expenses? The short answer is no—lawyers cannot generally lend their clients money due to strict professional ethics rules. In this post, we examine why these rules exist and explore available alternatives for clients who need immediate financial support while they endure the litigation process.

---

Why Can’t a Lawyer Lend You Money?

Lawyers are bound by a code of conduct that upholds the integrity of the legal profession and protects the attorney-client relationship. Here are the key reasons lawyers cannot lend clients money:

Avoiding Conflicts of Interest

If lawyers were to lend you money, their financial stake in your case could compromise their ability to provide objective and unbiased legal advice. For example, they might prioritize recovering their own loan over securing the best possible outcome for you.

Preventing Undue Influence

The attorney-client relationship is built on trust and professionalism. If a lawyer lends you money, it could create an imbalance in the relationship, where you feel obligated to follow their advice—even if it’s not in your best interest. It may be hard to envision a situation where this might arise as clients generally follow their attorneys’ advice. After all, legal advice is why they are hired in the first place.

But consider a situation where a personal injury settlement offer is presented and considered reasonable to the lawyer based upon the evidence, potential risks at trial and the costs involved. The client might feel that the settlement amount is too low and doesn’t adequately compensate for their pain, suffering, or future medical costs. Thus, he/she might want to hold out for a higher settlement or take the case to trial, even if the attorney warns that the trial could be lengthy, stressful, and uncertain in outcome.

The client might distrust the legal system or the attorney’s motives, believing they’re being pressured into a quick settlement to reduce the attorney’s workload or to wrap up the case faster. Or the client might have unrealistic expectations about the value of the case based on stories from friends, online information, or sensationalized media cases, leading them to reject the attorney’s advice on a reasonable settlement.

This type of disagreement can create tension in the attorney-client relationship and if a lawyer lends money on a case, the situation can become even more untenable. In some instances, clients seek second opinions or change attorneys. Ethics rules justifiably seek to avoid these conflicts.

---

Professional Ethics Rules

Most jurisdictions follow the American Bar Association (ABA) Model Rules of Professional Conduct, which explicitly prohibit lawyers from providing financial assistance to clients. Rule 1.8(e) allows only narrow exceptions, such as:

• Covering court costs and litigation expenses for indigent clients.
• Advancing litigation-related costs that will be reimbursed from a settlement.

Regulations ensure attorney advances don’t interfere with the lawyer’s duty to act solely in the client’s best interest.

---

Exceptions to the Rule

In some jurisdictions, however, the broad language of the rules permit advancing living expenses. The following jurisdictions have established exceptions to the general rule lawyers cannot lend you money in anticipation of settlement.

Minnesota

In Minnesota, lawyers can lend money “reasonably necessary for the client to withstand delay in litigation that would otherwise put substantial pressure on the client to settle because of financial hardship rather than on the merits.”

Minnesota Rule 1.8(e) permits lawyers to lend money to clients to cover costs that are reasonably necessary to withstand delay in litigation. The conditions are that the client remains ultimately liable for repayment of the loan regardless of outcome and the lawyer did not promise financial assistance to the client prior to being retained.

The purpose of this rule is to prevent clients from settling cases due to financial hardship, rather than on the merits.

District of Columbia

The District of Columbia allows financial assistance that is “reasonably necessary to permit the client to institute or maintain” the case. The transactions are governed by Rule 1.8 prohibiting lawyers from entering into transactions with clients.

Under Rule 1.8(d), a lawyer may pay medical or living expenses of a client to the extent necessary to permit the client to continue the litigation. The payment of these additional expenses is limited to those strictly necessary to sustain the client during the litigation, such as medical expenses and minimum living expenses. The purpose of permitting such payments is to avoid situations where clients are forced to accept “low-ball settlement offers in order to alleviate immediate financial troubles. Repayment is not required if cases are unsuccessful.

Texas

Texas Law allows lawyers to advance money to clients for lost wages, medical, housing, transportation, and funeral expenses. Texas Disciplinary Rules of Professional Conduct Rule 1.08(d) provides that: “a lawyer may advance or guarantee reasonably necessary medical and living expenses, the repayment of which may be contingent on the outcome of the matter.” 

While the Texas Penal Code Section 38.12(a)(3) makes it an offense if a person “pays, gives, or advances or offers to pay, give, or advance to a prospective client money or anything of value to obtain employment as a professional from the prospective client.” Section 38.12 (c) also provides “It is an exception to prosecution under Subsection (a) or (b) that the person’s conduct is authorized by the Texas Disciplinary Rules of Professional Conduct or any rule of court.” Since lawyers can lend you money under the Professional Conduct Rules, it is legal for lawyers to lend you money.

Generally, the advance is like a loan, but there is normally no repayment unless the case is successful and no interest is charged on client advances.  

California

The State Bar of California’s Rules of Professional Conduct also prohibits attorneys from lending money to clients for personal or business expenses. However, Rule 1.8.5(b) Payment of Personal or Business Expenses Incurred by or for a Client does provide an exception. It says the following:

“After the lawyer is retained by the client, [the lawyer may] agree to lend money to the client based on the client’s written promise to repay the loan, provided the lawyer complies with rules 1.7(b), 1.7(c), and 1.8.1 before making the loan or agreeing to do so.”

At their discretion, lawyers can lend money for transportation, food, rent, and living costs. Attorneys cannot lend money in an effort to sign up new clients nor can they advertise the practice to drum up new business. Under California law, lending clients money must not interfere with their professional judgment nor the lawyer-client relationship.

Alabama

Alabama allows “emergency” financial assistance of any kind (Alabama Rule 1.8(e)(3)). The rule states: “a lawyer may advance or guarantee emergency financial assistance to the client, the repayment of which may not be contingent on the outcome of the matter, provided that no promise or assurance of financial assistance was made to the client by the lawyer, or on the lawyer’s behalf, prior to the employment of the lawyer;”

Mississippi

Mississippi permits loans to clients of up to $1,500 for medical expenses and for living expenses under “dire and necessitous circumstances.” (Mississippi Rule 1.8(e) states: “Payments under paragraph 2 shall be limited to $1,500 to any one party by any lawyer or group or succession of lawyers during the continuation of any litigation unless, upon ex parte application, such further payment has been approved by the Standing Committee on Ethics of the Mississippi Bar.

Louisiana

In certain circumstances, a Louisiana personal injury lawyer can lend a client money.  Advancing clients money in contingency fee accident cases, like car accident matters, is regulated by the Louisiana Rules of Professional Conduct, Rule 1.8.

A client must request an advance in writing.  The advance can be used for basic necessities like rent, food, utility bills, school supplies, etc.  See Rule 1.8(e)(4)(i), (iii) and (iv). The loan cannot be excessive in relation to the need.  Thus, an attorney cannot loan $1,000.00 to a client to pay a $150.00 water bill.

The loan must be repaid using settlement proceeds.  However, repayment of the loan can be contingent upon the outcome of the matter.  These conditions regarding repayment should be explained to the client in writing in the beginning of the case. Further, where lawyers lend money to clients, clients should be given the full text of the rule at the time of settlement.

---

Guidelines for Accepting Advances from an Attorney

The client and attorney should adhere to the following guidelines if a lawyers lend money to clients. Ideally, the loan should be:

• In Writing, which describes the transaction in clear, reasonable terms, advises the client of their rights, and serves as a promissory note obliging the client to pay back the loan. The attorney must also clearly explain the terms.
• Be Used for Reasonable Living Expenses which can cover housing, utilities, food, and other necessities. The money should not be used unrelated expenditures.
• Never be used to pressure a client into changing attorneys. This is considered an ethics violation on behalf of the succeeding attorney because it’s an inducement to gain a client.

---

Alternatives to Your Lawyer Lending You Money

While your lawyer generally cannot lend you money, there are several alternative ways to secure financial support during a lawsuit:

Lawsuit Loans

A lawsuit loan, also known as pre-settlement funding, provides a cash advance against your potential settlement. Third party companies, not lawyers, offer lawsuit loans. And they are non-recourse—meaning you repay only if you win your case. They are a partial sale of your future recovery and are not actually loans.

Legal Aid Organizations

If you’re unable to afford legal costs, nonprofit organizations and legal aid groups may help cover certain expenses, such as filing fees or expert witness costs. These types of arrangements are generally not used for personal injury cases where attorneys are retained on a contingency fee basis.

Personal Loans or Support

You can also seek financial assistance from traditional lenders, friends, or family. This option avoids the high-interest rates often associated with lawsuit loans. Since there are major differences between personal loans and lawsuit loans, each option should be considered carefully. For example, credit scores and income verification are generally requirements for traditional lenders. With lawsuit loans and loans from friends and family, credit scores are normally not part of the equation.

---

Final Thoughts

While it may seem convenient for a lawyer to lend you money, doing so might jeopardize their professional integrity and your case. Fortunately, alternatives like traditional loans, lawsuit loans and legal aid exist to help clients manage financial challenges during litigation. If you’re exploring lawsuit funding, give us a call. The phone will be answered by a live lawsuit loan representative who will answer all of your questions.

By understanding why a lawyer can’t lend you money and exploring available options, you can make informed decisions that keep your case—and finances—on track.

Why Choose Fair Rate Funding

You obviously have a choice in who you use for legal funding. We offer:

• Simple and Easy Process – Approval only on the strength of your case.
• Risk – Free Proposition – Only repay if you win your case.
• Rapid Approval and Funding – Approvals often within 24 hrs.
• Up Front Pricing – Absolutely no hidden fees.

---