The Short Definition
Legal funding — also called pre-settlement funding, lawsuit funding, or a lawsuit cash advance — is money advanced to a plaintiff against the expected proceeds of a pending legal claim. If the case results in a settlement or judgment, the advance plus an agreed fee is repaid from those proceeds. If the case fails, the plaintiff owes nothing.
Why It Exists
Lawsuits take time. Bills do not. The financial pressure on injured plaintiffs is exactly the leverage insurance companies use to force low settlements. Legal funding exists to neutralize that pressure: cover rent, medical bills, and groceries while your attorney negotiates from strength.
Loan vs. Legal Funding
- Loans require repayment regardless of outcome, make monthly payments, run credit checks, and verify income.
- Legal funding is non-recourse, has no monthly payments, no credit checks, and no income requirement.
For a deeper comparison, see our guide on legal funding vs. personal loans.
Who Qualifies?
Most plaintiffs represented by an attorney on a contingency-fee basis can apply. The strongest candidates are cases with clear liability, documented damages, and identifiable insurance coverage — see what cases qualify for the full list.
What It Costs
Funding costs more than conventional credit because the funder takes real risk — if you lose, they lose everything. Costs typically accrue over time, so the longer your case runs, the more you owe. Always request a full payoff schedule before signing.
How the Money Moves
At settlement, your attorney distributes proceeds in this order: legal fees and costs, medical liens, the funding payoff, and finally the remainder to you. You never write a check; everything resolves inside the settlement disbursement.
Sources & Further Reading
For broader context, see Consumer Financial Protection Bureau — consumer guidance on civil litigation funding. This article is general educational information and does not constitute legal or financial advice.
Frequently Asked Questions
The terms are often used interchangeably in marketing, but technically legal funding is not a loan. It is a non-recourse purchase of part of your potential recovery, with no obligation to repay if you lose.
No. Approval is based on the strength of your case, not your credit history. There is no credit check involved.
No. You must be represented by an attorney on a contingency-fee basis, because the funder coordinates verification and repayment through your attorney.