A Settlement Funding Company Can Help You Finance Your Litigation

images (4)A lawsuit can be a long lasting and therefore costly endeavor. If you got injured during a car accident or became a victim of medical malpractice, you might need to look into options of settlement funding if you don’t have sufficient access to money readily available.

The principle of settlement funding is simple: a lender provides cash advances to the requester in anticipation of a compensation settlement.

Here is what typically happens. The injured party, respectively the representing attorney, files an application with a financial institution that offers settlement funding options. The application will then be internally reviewed and an evaluation will be made based upon the likelihood of a successful verdict or ‘before trial’ settlement. Further to that, it will be estimated how much compensation money the plaintiff can expect. After that a decision is made and if it is in favor of the applicant, he will have to sign a contract holding the terms and conditions, before he will receive the settlement funding money.

Once the case is closed and the plaintiff awarded with his compensation, he will have to pay back the lender the loaned amount alongside with accumulated interest and other fees that may apply. At first glance this appears to be a win-win situation. But there is more than meets the eye and before signing a contract with a settlement funding lender, the overall situation needs to be carefully looked at and all aspects taken into consideration.

Life Settlement Funding

images (3)Life settlement funding, also known as senior settlement or life time settlement, is a scheme that allows qualified life insurance policy owners to liquidate a life insurance policy for an amount much higher than the cash surrender value. If a senior person, over 65 years old, owns a policy that is no longer needed or affordable or there is no option but to lapse, then the life settlement funding companies help him in selling his Life Insurance Policy at a much higher price than what he would have received by surrendering the policy. Life settlement funding companies have created a secondary market for life insurance policies.

The entity buying the policy becomes the new beneficiary of the policy and is responsible for all premium payments from the time of the purchase. Life settlement funding provides many additional benefits to the policy owners like relief of monthly premium expenses, additional funds to supplement retirement income, and funds to seek treatments not covered by health insurance. The seller can decide whether or not to work with a broker.

Life settlement funding has not yet become a mainstream financial product but it has created competition for the life insurance companies, by giving the consumers a choice to sell their policies in an open market for a higher price, above the cash surrender value offered by insurance companies. The top providers in the life settlement funding companies hold the seller’s policy as a confidential portfolio asset, and do not make it available to outside investors. Although most states have laws and regulations in place covering viatical settlements, less than a half has laws regarding life settlement funding or senior settlement funding.

Structured Settlement Funding

Structured settlement funding is the funding over a structured settlement, a settlement in which the reward is paid to the plaintiff over a course of time. The period of time will vary according to the merit of the settlement, often from two years to the remaining life time. Unlike pre settlement funding, structured settlement funding does not depend upon the assumed strength of the settlement, as the settlement value is already determined. More over, an annuity or government bond generally guarantees structured settlements.

With regard to the funding agency, structured settlement funding has many advantages over other modes of settlement funding in terms of managing larger amounts of cash, tax exemption, flexibility, and stability. It is also possible for the person selling his settlement to be taxed for the amount he receives through the sale, although he might have been tax free prior to transfer. It is better to consult a lawyer before signing a contract with a structured settlement funding company as he can provide the required legal assistance. A structured settlement funding company which buys a settlement does that only for profit and the profit comes from the payments that otherwise the holder of the policy would have received. Major disadvantages of structured settlement funding are the high commissions on the purchases by the companies and in equal payments; inflation causes reduction in real value of payments.images (2)

Structured settlement funding needs approval from a judge, because of a recently enacted federal law. Most of the structured settlement funding companies offer the entire court fee needed for the transfer process. Structured settlement funding of a settlement right depends on one’s home state and the insurance company that provides the settlement annuity. About two third states have laws that restrict structured settlement funding and some insurance companies that give the annuities prevent the transfer of settlement rights to third parties.

Post Settlement Funding

images (1)Post settlement funding is a method to access one’s verdict cash before the distribution of the compensation cash. Post settlement funding companies provide money to a plaintiff, which will be somewhat lesser than the verdict amount.

Post settlement funding provides non-recourse funding for attorneys and/or their clients based on the settled case. The funding company buys the fee at a discount and makes their money from this discount when the fee is paid a few months later. Post settlement funding procedure is simple and fast compared to Pre Settlement Funding procedure, in which advance funds are provided anticipating the verdict to be in favor of the client.

Post settlement funding is mainly done for fees that will be collected in less than 12 months, but many companies provide post settlement funding for a much longer period, even for two or more years. Unlike pre settlement funding, post settlement funding does not affect settlement incentives, since the settlement is already final. Most post settlement funding companies provide funds in all compensation cases. In post settlement funding the money can be spent at the plaintiff’s own will, which is almost impossible in pre settlement funding, where companies will restrict items on which money can be spent.