LITIGATION FINANCING 

Definition

Issuance of cash advances to lawyers and plaintiffs in exchange for a portion of the financial recovery. A contingent transaction in which funds are advanced based on the merits of a pending lawsuit and repaid upon successful settlement, verdict or other. Financing obtained to assist in the litigation process to be used for purposes directly or indirectly related to the case.

Facts

4,500 people apply for litigation financing each day in the United States. It is estimated that 59% of applicants are approved for Financing. The majority of all litigation Finance applications are for medical expenses of those that not fortunate to have health insurance and the remainder is for immediate and necessary living expenses. Those who have been severely injured in accidents caused by the negligent acts of another can be financially devastated during the process. Many will be put out of work for weeks or months and will not have income during their recovery period. Litigation Financing is sometimes the only access to Financing as many of these victims do not have good credit and/or income to qualify them for a traditional loan. Traditional loans require monthly payments which can be difficult for plaintiffs that are injured and without income for a short or extended period of time. Most major accidents leave the victims either dead or injured so badly that it takes months or even years to recover. It is certain that more than 40,000 people would go homeless each year if it were not for access to litigation Financing.

Understanding Litigation Financing

Litigation financing is never really about financing but rather advancing cash to a person in need. Litigation finance is merely to word used to describe the transaction in which people receive needed cash to pay for immediate living expenses. While this type of funding is never becomes public, the challenges faced by personal injury victims are very real.

Research on the subject of litigation financing varies widely and differing opinions create some controversy. On the one hand people are obtaining financing when they need it most and without credit or income. On the other hand, the companies funding these transactions have been accused of usury, predatory lending and even unethical behavior. The one fact that is not argued among players is that these personal injury victims need financial assistance and nobody else is willing to come to their aid.

People that criticize litigation financing complain of the high fees charged to consumers that are in a very unfortunate situation. It is argued that this type of Financing actually takes money from the consumer wallet rather than improving his/her life. Elliot Spitzer has investigated the litigation financing industry and settled with them based on terms of fair disclosure. Mr. Spitzer concluded that it is ok to do business here in New York but be fair in your disclosure to terms and fees to the public. Some have even gone as far as to call litigation financing a form of predatory advancing. It seems outrageous for allegations to be made about predatory lending when litigation Financing is not actually lending bur rather investing. The presidents of financing companies that are criticized have been eager to speak out and defend the industry because they believe they are doing far more good than bad. Consumers should investigate each financing company by asking questions and determining their fees and conditions. Make sure the company you choose is a member of the American Litigation Finance Association also known as ALFA. This association has rules and best practices that members must follow when conducting business with consumers.

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Links

http://www.brianloncar.com/

http://findlaw.com/01topics/29litigation/

http://www.spitzer2006.com/main.cfm