What is Litigation Funding?

By: LawInfo

Published: 05/2009

Sometimes you have no choice but to sue another party in court for personal injuries that sustained in an accident. The reasons for the lawsuit may be just and the potential outcome of the lawsuit may be important. However, no matter how just or important a case is the potential plaintiff must weigh the potential benefits of litigation against the actual costs of litigation.

The Costs of Litigation

There is no arguing that litigation is expensive. In addition to attorney’s fees, plaintiffs usually have to pay court costs and may also need to pay for things such as expert witnesses and discovery. Some plaintiffs feel that they cannot handle these litigation costs and they either choose not to file a lawsuit or they accept a quick and often low settlement offer in order to avoid incurring further expenses. They should be aware, however, of different litigation funding options which may help them effectively handle the costs of litigation.

Litigation Funding Options

Few plaintiffs have the resources to pay all of the costs described above out of pocket. Instead, many personal injury plaintiffs use one or more of the litigation funding options that are available. Depending on his or her financial situation and the circumstances of his or her case, a plaintiff may find one of the following litigation funding options beneficial:

· Contingent Fee: Many persona l injury attorneys are hired by plaintiffs on a contingent fee basis. That means that the attorney does not collect a fee unless the plaintiff recovers damages either through a settlement or a court proceeding. If the plaintiff does not recover any damages then the attorney is not paid. However, plaintiffs should be aware that attorneys who are paid pursuant to a contingent fee arrangement may take a relatively high percentage of the damages in return for the risk that they take of not being paid at all. Also, the plaintiff is still responsible for all court costs, expert witness fees and other litigation costs. Often, these costs must be paid periodically throughout the course of the ligation.

· Loan from a Relative or Friend: Many plaintiffs find it necessary to borrow money from friends or relatives in order to pay their attorney fees and / or their litigation expenses. The terms of every loan are different. Some plaintiffs might find these the least complicated and least expensive way of borrowing money to fund their lawsuit. However, other plaintiffs may find it uncomfortable to borrow money from a friend or relative.

· Litigation Funding Company: Litigation funding companies provide qualifying personal injury plaintiffs with funds in advance of the lawsuit’s resolution. If the litigation funding company finds it likely that the plaintiff will recover damages then the company may provide money to the plaintiff. Then when damages are awarded the litigation funding company is repaid the money that was borrowed along with any previously agreed upon fees and interest.

· Personal Loan: It is often difficult for personal injury plaintiffs to obtain personal loans through banks in order to finance their lawsuits. Banks typically view these loans as too risky since it is difficult to predict how a jury will view the facts of the case and what kind of award the jury might make in a case.

If you are a personal injury plaintiff then it is important to consider all of your funding options prior to deciding how best to proceed with your lawsuit.