Should Lawsuit Funding Companies Be Avoided in Florida?
Often, a personal injury case takes time before it settles, or before it goes to trial. Not every case takes a long time, but certainly, when you are an injury victim, and you are out of work and bills are mounting—especially medical bills—even a short period of time can seem like a very long time.
Many victims see advertisements for lawsuit funding companies. These companies promise to pay you for your damages now, so that you don’t have to wait for your injury case to resolve. The promise for immediate funding seems great, but is it actually beneficial?
How Lawsuit Funding Companies Work
Lawsuit funding companies look at your case, and come up with an estimate for what they think your case is worth—that is, what they think the insurance company will settle for, or what they think a jury will award you. They analyze the pros and cons of your case to come up with this dollar value.
They then pay you that value, or at least, some portion of the total value. When your case is over, you have to pay that money back to them, with interest.
Generally, you will not owe them money if you lose your case or some other unexpected event happens and you don’t get money (for example, if the Defendant were to file bankruptcy). If you win less than what you borrowed, you usually will not have to pay the company back the difference.
Interest Can Add Up
However, there are a lot of drawbacks to using these companies which don’t make them a good option. The first and most obvious problem is the interest that you will owe when your case is over can be exorbitant.
Let’s say the company loans you $10,000. Later, you settle your case for $20,000. You could end up never seeing any money, as your interest plus the initial $10,000 you now have to pay back could add up to the $20,000 settlement.
With some loans, interest is based on how long you have taken out funding. That means that the strategy of holding out for a better settlement from the insurance company or holding out for a full trial, which is often a smart strategy, now ends up costing you money, as interest is accruing as time goes on.
Many companies have penalties for voluntarily dropping your case. Although this rarely happens, as you’re filing your case because you need compensation for your injuries, sometimes life events require that victims walk away from cases.
With lawsuit funding, you lose that option or even the option of taking just a smaller settlement, so you can resolve the case and move on.
We understand what personal injury victims are going through and can explain your options to you. Call the Fort Lauderdale personal injury attorneys at Rosen Injury Law today for help.