Debunking the Myths of Legal Funding

Legal funding is the new financial trend in the United States today. Industry leaders are currently reviewing over 40,000 funding applications each month, which shows just how much legal funding rose from relative obscurity to the forefront of legal solutions for plaintiffs and their attorneys. Despite its strong foothold in the legal system, there are still several myths about legal funding that continue to persist. Some of these have no factual basis to support them.

The first myth says that legal funding exploits plaintiffs when they are vulnerable and unable to make good decisions. In reality, this option serves as an escape hatch for those whose funds have been drained by the slow movement of the legal process and circumstances. An example of this would be a single, working mother. Legal funding provides her some relief from bills, the possibility of eviction, and keeps food on the table for her and her family.

Another myth says that legal funding is a loan. While they possess similar characteristics to traditional loans, legal funding is quite different from that. The plaintiff usually receives a cash advance that does not need to be paid until the case is settled. The repayment for the advance is only required when the lawsuit is a success; if it is not, the client’s obligation to pay it back disappears.

The third myth states that legal funding companies interfere with the legal process. This fear is based on the possibility that the lender will put pressure on the attorney to repay the cash advance by settling the case quickly. However, funding firms are never involved in the case, and all legal decisions are made by the lawyer and the client.

Legal funding can relieve the plaintiff of financial stress and buys the attorney more time to fight for a fair and larger settlement. A lot of your clients will experience financial difficulties during the case and as a lawyer, you need to be educated on legal funding so you can advise them to take advantage of this financing alternative. Understanding the fundamentals of legal funding and separating the facts from the myths will give you the tools needed to better serve your clients.