Can I Get Pre-Settlement Funding Without Attorney Consent?

Does Your Attorney Need To Know if You’re Getting Pre-Settlement Funding?

You’re not required to tell your attorney that you’re seeking pre-settlement funding, nor must you get their consent. Many people apply for pre-settlement financing without getting their lawyer involved.

You might consider leaving your lawyer out of the application process if the attorney believes your case isn’t strong enough to get approved for pre-settlement funding. Your lawyer might be right, but you have nothing to lose by applying. 

While your attorney doesn’t have to know you’re applying for funding, most licensed pre-settlement funding companies must speak with your attorney before approving the application, regardless. 

Pre-settlement funding can provide much-needed financial support to plaintiffs encountering financial challenges due to their lawsuit. However, it is essential for individuals to carefully evaluate the terms and costs associated with this form of financing. In many cases, the terms are disadvantageous, and the costs are exorbitant. Professional consultation is recommended.

Thomas J. Brock, CFA®, CPAInvestment, Corporate Finance and Accounting Professional

Thomas Brock, CFA®, CPA, is a financial professional with over 20 years of experience in investments, corporate finance and accounting. He currently oversees the investment operation for a $4 billion super-regional insurance carrier.

The Role of Attorneys in Pre-Settlement Funding

Attorneys usually help with the pre-settlement funding application process in multiple ways. They can help find reputable lenders, gather any documents to submit and review any funding contracts you’re considering accepting. They sometimes provide lending companies with legal insight into your case, improving your chances of getting funding. 

Working with an attorney during the pre-settlement funding application process eliminates legwork you’d otherwise have to do yourself. It also gives you access to expert legal advice and helps ensure that you stay away from fraudulent lenders.

Why You May (or May Not) Want To Tell Your Attorney About Your Pre-Settlement Funding

You may apply for pre-settlement funding from some lenders without telling your attorney. However, most lenders won’t approve your application without speaking to your attorney. 

Lenders consult with an applicant’s attorney to determine the likelihood of winning a settlement in court and how large a settlement could be. If you don’t want to get your attorney involved, lenders won’t be able to gauge the strength of your case effectively. They might ask for additional documentation and other proof of your claims instead. They might also ask you to put up some collateral for your loan, such as a lien on your house or car. 

Drawbacks to applying for pre-settlement funding without an attorney include:

• Higher interest rates and fees
• A lower chance of being offered a non-recourse loan, meaning you may have to pay back your loan even if you lose your case
• A lack of legal guidance
• A higher chance of being scammed

Legal Considerations

There are a few legal considerations to be aware of if you decide to pursue pre-settlement funding without an attorney.

Most states require you to be represented by a lawyer when applying with a licensed pre-settlement funding company. If you don’t want to get a lawyer involved, you’ll be stuck applying to unlicensed companies that may try to take advantage of you. 

Not telling your attorney about your pre-settlement funding agreement could also affect the outcome of your case. Your lawyer can’t represent you to the best of their ability without knowing all the facts of your case. 

Ethical Considerations

Helping a client get pre-settlement funding may be against a lawyer’s professional ethics in some situations. 

If you receive pre-settlement funding, your lender becomes invested in the outcome of your case. This may cause them to influence your court proceedings. Because your lawyer must act in your best interest alone, this can cause a conflict of interest that would make them unable to represent you. 

Your lender also may ask your lawyer for access to confidential legal documents to assess how likely you are to win your case. Because of attorney-client privilege, your lawyer can’t give your lender any confidential information without your explicit consent. Breaking confidentiality like this may compromise your case and weaken your chances of winning your suit. 

The American Bar Association (ABA) has a set of recommendations for best practices in the pre-settlement funding industry. 

According to the ABA:

• All terms of funding contracts should be clearly disclosed.
• The agreements should be non-recourse only.
• Funding companies should have no influence on the lawsuits their clients are involved in.

These guidelines are just suggestions. In most states, there are no laws requiring funding companies to follow them. It’s up to you to choose a lender that conducts their business in a way you feel comfortable with. 

When Might Pre-Settlement Funding Be the Right Choice?

You’re Experiencing Severe Financial Hardship

If you can’t pay your bills while your lawsuit is under litigation, pre-settlement funding is a simple way to get the needed cash. 

You Have Urgent Medical Needs 

Many lawsuits involve injuries that may need immediate and ongoing medical attention. If you need medical help you can’t pay for, pre-settlement funding may cover those expenses. 

You’re Having Trouble Paying For Daily Living Expenses 

Lawsuits can take many months to settle. If you have trouble covering your expenses, it may be worth seeking pre-settlement funding to avert future financial problems.

You Have Limited Alternative Funding Sources

If you need money and can’t get it any other way, pre-settlement funding may be your only recourse.

Alternatives to Pre-Settlement Funding

If you can’t access pre-settlement funding or expect to receive a structured settlement instead of a one-time payout, there are other ways to cover your expenses.

Pre-Settlement Funding Alternative Options

Personal Loans

If your credit is strong enough, you can take out a personal loan to fund your expenses during your lawsuit.

Credit Cards

Charging most expenses to your credit card is an option while you’re waiting for your settlement. However, it’s critical to pay off your balance with the funding money you receive so that you don’t compound your financial problems by becoming indebted to the credit card company.

Family and Friends

Your loved ones may be able and willing to offer you some financial support, especially if you commit to paying them back later. 

Crowdfunding

Crowdfunding websites like GoFundMe let you raise money from donations. If you explain your situation, people may agree to help you out.