Settlement financing refers to the financial help provided by lending companies to a petitioner pursuing a trial. This type of financing does not put any major pressure of liability on the borrower, except for the fact that he must part with a certain percentage of compensatory money received by the order of court. There is no element of risk involved on the part of the borrower, since he is not needed to repay the sum in case the court’s verdict is not in his favor.
Here are some of the major benefits offered by settlement financing:
i. To meet legal expenses: The plaintiff will have to bear huge legal bills for running the case which can take many weeks, months or even years. This type of financing helps him pursue the lawsuit. In the absence of this loan, he may have had to quit the case midway, or he would have got bankrupt or run into heavy debts.
ii. To avoid bankruptcy: Settlement financing also helps him escape the possibility of bankruptcy, which can become inevitable at times.
iii. To meet medical expenses: When the plaintiff has suffered physical injuries, then this loan can also come to his aid for getting proper and top-class treatment.
iv. For other domestic funding: The person is likely to have to wait for a long time before he can get any monetary benefit out of his court case. Such loans help him fund domestic expenses like college fees for the kids.
v. Peace of mind: These funds come with a peace of mind. The plaintiff does not need to worry about the time taken for the court to arrive at a decision. It becomes easier to wait, since he already has received the money.
vi. Greater bargaining power: With financial assistance, he can take stronger actions in the court and even hire a better attorney. This is a much-needed muscle power which he derives especially when he is battling a case against a powerful party or corporation.
vii. Zero liability: In case, the plaintiff loses the case, he will have zero liability towards the lender
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