Although the phrase “non-recourse lawsuit loan” is commonly used to describe legal funding or pre-settlement cash advances, the truth is that most transactions involving plaintiff and lawsuit funding companies are not “loans” in the traditional sense of the word.
When a case is approved for a non recourse lawsuit loan, the two parties entering into the agreement are the plaintiff and the pre-settlement funding company. The plaintiff has a lawsuit or a “potential claim” for damages against the defendant(s) in a case. When a legal funding transaction occurs, the plaintiff assigns his/her rights to the future proceeds of that claim, if any.
What the plaintiff does NOT do is “borrow” funds from the lawsuit financing entity. He/she simply assigns a portion of the proceeds of the case if there should happen to be proceeds at some point in the future.
While the charge for these lawsuit cash advances is calculated by “interest” on the principal, that fact does not make the transaction a loan. In fact, if the plaintiff does not recover any monetary award from the case, the money advanced does not need to be paid back at all. This is what we mean when we say “non-recourse”. The party advancing the money (the lawsuit funding company) assumes the risk of non-payment if there is no recovery. The company does not have “recourse” against the plaintiff personally. The company only has an interest on the proceeds of the case as a result of plaintiff’s assignment pursuant to the contract.
In other words, “non – recourse” lawsuit loan means the lawsuit funding company cannot go after the plaintiff personally if the case does not settle or is otherwise resolved successfully.
Thank you for your interest in non recourse lawsuit loans.