What Makes a Lawsuit Fundable?
At Fair Rate Funding, we get funding requests for a wide variety lawsuit types. Fortunately, we are able to help many of these plaintiffs. There are limits however. In this post, we examine what makes up a fundable lawsuit and delve into the reasons why.
The Structure of Lawsuit Loans
Lawsuit loans are financial agreements where a plaintiff sells a portion of their settlement ahead of time. The deals are structured as an assignment of future proceeds and as such, a sale of property rights under the law. In other words, the lawsuit “lender” purchases part of the settlement. That is its investment.
Although referred to as lawsuit loans or settlement loans, these transactions are not actually loans in the traditional sense of the word because with traditional loans, repayment is implicit in the agreement.
With lawsuit “loans”, repayment is contingent upon a successful outcome. That is, if there is no settlement or recovery, the lender gets nothing for its investment. A fundable lawsuit then is one with a high probability of success.
What Fundable Lawsuits Means
It is the unique nature of lawsuit loans that makes the question, “what makes a lawsuit fundable?” important. Below we examine what lawsuit lenders look for in a fundable lawsuit.
Having a case with strong liability is a must in a fundable lawsuit. Consider an automobile accident where one car rear ends another car. The law states the following car is at fault for the accident because more following distance would likely given the driver more time to stop, thus avoiding the crash.
Rear end automobile accidents are the gold standard for fundable lawsuits as far as liability is concerned. This is simply because liability is clear under the law. Other facts or case types may involve other liability issues that may not be as clear.
Damages are the reason why a lawsuit is initiated in the first place. The most fundable lawsuits have clear and severe damages.
For example, a personal injury lawsuit where the plaintiff can no longer work would likely be a fundable case. In addition, pain and suffering damages, although more difficult to precisely quantify, are good candidates for funding.
Because there is a limit to the amount a lawsuit lender is willing to advance plaintiffs, the larger the potential damages, the larger amount of cash is available to plaintiffs in need.
The Ability to Collect
Winning a lawsuit is only part of the battle. The other part is getting paid. Despite winning the case, collecting a judgment may be troublesome for a variety of reasons. Perhaps the defendant has no money and is not covered by an insurance policy. Accordingly, cases with uninsured defendants are rarely fundable lawsuits.
Contingency Fee Attorney
All plaintiffs with fundable lawsuits are represented by counsel. Having an attorney on your side is a major requirement for lawsuit funding transactions. Contingency fee retainers allow plaintiffs to access the legal system without having to pay hourly fees to their lawyers. Instead, the lawyer’s fee is “contingent” on a successful outcome and are the norm with fundable cases. Thus, having an attorney who is paid only if successful is a prerequisite.
Despite calls to regulate the lawsuit funding industry, lawsuit loans are unregulated in many jurisdictions. Some states have outlawed lawsuit loans as against public policy. Others have so regulated the business that a profit cannot realistically be pursued. Thus, fundable lawsuits must be brought in states which recognize the benefits of lawsuit loans and protect its market participants.
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Fundable Lawsuits Case Types
Certain lawsuits are good candidates for funding simply because most of the above are satisfied in routine cases. These include:
- Animal & Dog Bites
- Amusement Park Accidents
- Automobile Accidents
- Asbestos Cases
- Aviation Accidents
- Bicycle Accidents
- Boating Accidents
- Bus Accidents
- Construction Accidents
- Defective Products
- Maritime cases
- Medical Malpractice
- Motorcycle Accidents
- Motor Vehicle Accidents
- Nursing Home Negligence
- Pedestrian Accidents
- Premises Liability
Remember, although lawsuit loans are considered for these case types, each matter is evaluated individually before it can be considered a fundable lawsuit.
What Makes Fundable Lawsuits
A fundable lawsuit is one which meets the underwriting criteria of a lawsuit lender. Above, we discussed some common characteristics most fundable cases share. If you have any questions regarding whether your lawsuit is a candidate, give us a call. The call is free and you are under no obligation whatsoever.
Thank you for your interest in Fair Rate Funding.