Finding & Funding
If you’ve watched any amount of late-night TV, you’ve undoubtedly experienced commercials of the “if you’ve been in an accident … ” variety. While these ads contribute to the stereotype of lawyer as ambulance chaser, they do reach people in trouble who might otherwise be reluctant to turn to the courts for assistance and legal relief.
But while finding a lawyer is the first step in any lawsuit you plan to file, in many cases the issue of how to find a lawyer will soon be supplanted by the question of how to fund one. If you have been in an auto accident or suffered a work-related injury—common situations in which a lawsuit might be needed to receive compensation from a party unwilling to admit guilt—then you might be in no position to work. “Claims like these might take months or even years to be resolved,” says Gary Chodes, founder and CEO of Oasis Legal Finance in Northbrook, Ill. “In that time, the plaintiff can get caught in a downward financial spiral, especially if they have unpaid medical bills.”
Oasis Legal Finance is one of many companies operating a relatively new type of financial service referred to as legal funding or third-party litigation financing. “We provide [plaintiffs] with funds to do things like pay the rent, pay a mortgage or make a car payment,” says Chodes. “With that support, they can continue to pursue their claim and have the best chance of getting what the claim is worth. The alternative is that they might settle for substantially less.”
Facts About Funding
As an industry, legal funding has been around for less than a decade. In general, legal funding resembles a loan; a financial company advances an individual a certain amount of money—perhaps 10 percent of the amount that the plaintiff is requesting in the lawsuit—then charges interest on that amount. Interest rates tend to be high—rates of 30 percent to 35 percent aren’t unheard of—but after a certain period of time, the interest rate drops to zero, thus capping the amount that the plaintiff has to repay.