How to Choose a Litigation Funding Company

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By: LawInfo

Published: 05/2009

Many plaintiffs find litigation funding to be an important part of their personal strategy to maximize the amount of damages that they can recover from a defendant in a personal injury lawsuit. Litigation funding companies can provide plaintiffs with the money that they need to fund their lawsuit and to pay their expenses while their case is being litigated. In return, the litigation funding company is entitled to recover its money plus any agreed upon fees or interest from the plaintiff if the plaintiff is awarded damages in litigation or a settlement.

It is important for plaintiffs to remember that not all litigation funding companies have the same policies or fees. Therefore, plaintiffs should research the following information prior to entering into an agreement with a litigation funding company:

Ask about upfront payments/ monthly charges: Litigation funding companies often charge fees in return for their services. Some charge both an upfront or an origination fee and a monthly maintenance fee while others only charge one of those types of fees.
Ask about application fees: Some companies require you to pay an application fee regardless of whether the company decides to provide you with the funds for your lawsuit.
Ask what happens if you lose your case: Some litigation funding companies only recover the money that they provided to a plaintiff if the plaintiff wins the lawsuit. So, if the plaintiff loses the lawsuit then the litigation funding company does not recover anything. If you seek to do business with a litigation funding company that does not have this policy and will instead require you to repay the money even if you lose your case, then you should be prepared to repay the money if you lose your lawsuit.
Testimonials: A reputable litigation funding company should be able to provide you with references so that you can speak to previous customers about their experiences before doing business with the company.
Attorney recommendations: Many states allow attorneys to recommend specific litigation funding companies to their clients. Your attorney can be a reliable source for finding a reputable company.
Understand what happens if you win your case: Litigation funding companies recover their money if you win your case. However, it is important to understand just how much money the litigation funding company will be entitled to if you recover damages. Most companies recover the amount provided by the company to the plaintiff plus an additional amount for every month between the time the money was provided to the plaintiff and the money was returned to the company. That amount varies from company to company but is typically in the 3-5% per month range.

If the litigation funding company is hesitant to provide you with the information that you seek or if previous customers or attorneys have reservations about the company then it is important that you think carefully before entering a contract. There are plenty of reputable litigation funding companies available that provide plaintiffs with the money necessary to win their case.