What Is Non-Recourse Funding
The weeks or months following an accident can be a chaotic and uncertain time. While you wait for the settlement from your personal injury claim, you still have bills you need to pay. If your injuries took you out of work, finding cash to cover your expenses may be difficult.
Fortunately, pre-settlement funding can help you manage costs until your claim is settled. In exchange for a portion of your future settlement proceeds, a company will offer you an advance of cash you can spend on whatever you want.
One difference between a pre-settlement advance and other options is that it’s a form of non-recourse funding. What this means is that a company is buying a portion of your future settlement proceeds, and they will only get that money when your claim resolves. If your claim isn’t successful, the company cannot recover their advance.
What is the Difference Between a Loan and Pre-Settlement Funding?
It’s important to note that pre-settlement funding is a non-recourse advance, not a loan. When you take out a loan, you’re typically borrowing the money from a bank or other financial institution. After you receive your cash, you pay back the loan in monthly installments, including interest. If you’re unable to repay the loan, you could be at risk of the following:
- Effects to Your Credit Score: Failing to repay a loan can have a negative effect your credit score, making it harder to borrow in the future
- Forced Asset Sale: Depending on the nature of the loan, the lender might have the ability to sell your home, car, or other assets to help them recover the money you owe
If you choose pre-settlement funding, things are different. The company isn’t lending you money, they’re offering an advance. The company buys a portion of your expected settlement proceeds in exchange for cash. You don’t have monthly payments to worry about, the advance is yours.
Once your case is resolved, the company from whom you received funding will receive the portion of the settlement proceeds they purchased. Your attorney receives their fee, and then you receive the remainder either as a lump sum or in the form of a structured settlement.
What Happens if I Lose my Case?
Companies are willing to buy a portion of your settlement proceeds because they believe that you have a strong claim. However, sometimes things do not go the way your attorney thinks, and your claim might get denied.
Losing your case can be frustrating and financially challenging, but one thing you won’t have to worry about is paying back your advance. Because pre-settlement funding is non-recourse, you will not have to pay a fine or make payments to the company if you lose. The money you received as an advance is still yours to spend, even if you have no settlement coming.
What Happens if My Claim is Smaller Than Expected?
Another common concern is what will happen if you have your claim approved, but it’s not as large as your attorney expected it will be.
When you received your advance, the company offering it bought a portion of your expected settlement proceeds. Once your attorney resolves your claim, the company will receive whatever they purchased and your attorney will still receive their fees. You will receive anything that remains.
In some cases, the final size of your claim is smaller than what the company bought when they offered you your advance. They will still receive as much of what they purchased as they can, but you will not be responsible to pay back anything they can’t recover. However, this could mean that you do not receive any additional money from your settlement.
To prevent this from happening, many companies will only buy a small portion of your expected settlement proceeds. This way, if your claim ends up being smaller than your attorney thought, you’ll still receive something from your final settlement.
Pre-Settlement Funding Gives You Options
The time spent waiting for a claim to settle can take weeks or months. If your injuries are serious enough to take you out of work long term, you might be forced to put your life on hold while you wait to receive the money you’re owed.
Call Peachtree Financial today to learn more about pre-settlement funding. A pre-settlement advance lets you move on with your life by giving you a way to get back on your feet sooner.
Peachtree Financial does not offer legal, tax, or financial advice. Please contact independent professionals for those services.