Pre-Settlement Funding: Do You Need Your Attorney’s Consent?

Exploring the Need for Attorney Involvement in Pre-Settlement Funding

You may be wondering whether it’s necessary to inform your attorney about your decision to seek pre-settlement funding. The truth is, you are not obligated to share this information or obtain your attorney’s consent. Many individuals choose to apply for pre-settlement financing without involving their lawyer.

There may be instances where it’s beneficial to exclude your attorney from the application process. For example, if your attorney believes your case lacks the strength to secure pre-settlement funding, you can still explore this option independently. While your attorney need not be aware of your funding application, most reputable pre-settlement funding companies will require communication with your attorney for approval.

Pre-settlement funding can provide much-needed financial support to plaintiffs facing financial challenges due to ongoing lawsuits. However, it is crucial to carefully assess the terms and costs associated with this form of financing. In several cases, the terms can be disadvantageous, and the costs exorbitant. Seeking professional consultation is highly recommended.

Understanding the Role of Attorneys in Pre-Settlement Funding

Attorneys play a pivotal role in the pre-settlement funding application process. They can assist in identifying trustworthy lenders, compiling necessary documents, and reviewing funding contracts. Moreover, attorneys can offer valuable legal insights into your case, increasing the likelihood of funding approval.

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Collaborating with an attorney throughout the pre-settlement funding journey eliminates the need for you to perform extensive legwork. It grants you access to expert legal advice and safeguards against fraudulent lenders.

The Pros and Cons of Involving Your Attorney

While you have the option to apply for pre-settlement funding without involving your attorney, most lenders prefer to speak directly with legal counsel. This is because lenders rely on attorneys to evaluate the strength of your case and estimate potential settlement amounts. By choosing not to include your attorney, lenders may request additional documentation and proof to determine the credibility of your claims. Additionally, they might require collateral, such as a lien on your property or vehicle, to secure the loan.

Some drawbacks to applying for pre-settlement funding without an attorney include:

  • Higher interest rates and fees
  • Reduced chances of obtaining a non-recourse loan, meaning you may be obligated to repay even if you lose your case
  • Limited legal guidance
  • Increased risk of falling victim to scams

Legal and Ethical Considerations

Before pursuing pre-settlement funding without an attorney, it’s crucial to understand the legal and ethical implications involved.

In many states, the involvement of an attorney is mandated when applying with licensed pre-settlement funding companies. Failing to engage a lawyer may force you to resort to unlicensed companies that could potentially exploit you.

Furthermore, withholding information about your pre-settlement funding agreement from your attorney can adversely affect your case’s outcome. Without complete knowledge of your financial arrangements, your lawyer may not be able to represent your best interests effectively.

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Ethically, assisting a client with pre-settlement funding can present challenges for lawyers. When you accept funding, your lender becomes invested in your case, potentially influencing court proceedings. Consequently, this poses a conflict of interest that may prevent your attorney from representing you impartially.

Moreover, lenders may request access to confidential legal documents to assess the likelihood of your victory. However, your attorney cannot disclose confidential information without your explicit consent, as this would breach attorney-client privilege. Revealing such information could jeopardize your case and weaken your chances of success.

The American Bar Association (ABA) provides recommendations for best practices in the pre-settlement funding industry. These guidelines propose that all funding contract terms be transparently disclosed, contracts should only be non-recourse, and funding companies should refrain from interfering with their clients’ lawsuits.

It’s important to note that these recommendations are suggested rather than legally required. As a client, it falls to you to select a lender whose business practices align with your comfort level.

Is Pre-Settlement Funding the Right Choice?

If pre-settlement funding is not accessible or if you anticipate receiving a structured settlement rather than a lump sum, alternative options exist to cover your expenses.

Considerations When Exploring Pre-Settlement Funding Alternatives