A pre-settlement loan is exactly what the name implies – a cash payment to the plaintiff in anticipation of a favourable settlement. Pre-settlement loans fall under the 'non-recourse category of legal debts, which means that the extender of the loan has no recourse to recover the money in case the plaintiff's case is not settled favourably.
Such loans are either paid in full before or during the litigation process or extended into monthly payments. This usually depends on the convenience of the recipient, although it is generally believed that monthly payments allow better financial management.
A plaintiff is eligible for a pre-settlement debt, an official lawsuit filed to claim damages caused by the negligent acts of others, or if they have suffered a workplace injury or damage in the course of employment.
They are also extended when the case involves a case of wrongful death, or when the death of a person is due to the negligence or willful act of a wrongdoer. In such cases, the plaintiff holds a certain individual, corporate body, or government entity responsible for the death of another. Close relatives of the deceased, sometimes in constrained financial circumstances, may file cases of wrongful death. In such cases, a pre-settlement loan can make all the difference.
Financiers extending pre-settlement loans bank on settling the plaintiff's case before the normal legal process is completed. If the case is open and closed or is unlikely to be resolved in the defendant's favor, the defendant's attorney will advise for a 'settlement' - meaning that time and money are saved on a foregone conclusion. When this happens, pre-settlement loans are recovered along with interest.
It is advisable that a plaintiff shop around for the best possible interest rates on a pre-settlement loan (or any other type of legal financing), like these, vary from financier to financier. It's a very bad idea to accept the first offer that comes along.