A pre-settlement funding buyout can provide a vital financial strategy for someone already leveraging a cash advance against their pending settlement.
It’s not uncommon to struggle financially during pending litigation—even if you already have a lawsuit loan.
If your litigation drags on for several years, you might be further burdened by additional monetary demands.
In this situation, a settlement buyout will allow you to take another lawsuit loan to get you through. Read on for an overview of a pre-settlement funding buyout.
What Is a Lawsuit Funding Buyout?
A lawsuit funding buyout happens when a plaintiff, having already secured a cash advance against an impending settlement, seeks additional financial aid.
The plaintiff typically chooses a different company. The new funding entity will nullify the debt to the initial company by arranging a buyout.
Subsequently, the buyout amount folds into a new funding agreement, accompanied by a further cash advance.
Essentially, the plaintiff will refinance the initial lawsuit loan, often at a lower rate, and merge it with the new advance.
This step will form a single contract whereby they owe repayment to the new company that bought out the original lawsuit loan.
While some companies might allow you to take more than one advance, most of the time, this involves multiple companies.
Why It’s Necessary to Have a Lawsuit Loan Buyout
Every lawsuit loan company has its own funding guidelines and restrictions regarding advances.
Some companies might be willing to offer additional loans to existing customers, but that’s not usually the case.
There’s almost always some limitation, whether the amount, total number of advances, or the time between requests.
The plaintiff might want a lawsuit loan buyout because they’ve agreed to an uncapped or very high rate out of necessity.
Either of these scenarios can cause the loan balance to become unmanageable. It’s important to refinance them as quickly as possible before the balance skyrockets.
The plaintiff might also need to seek a buyout for other reasons.
Factors such as discomfort with the current funding relationship, the existing funding company meeting its portfolio requirement for that specific case type, or the lawsuit lending company becoming uneasy with the lawsuit’s progression may make it necessary for a plaintiff to seek alternative funding.
Factors such as discomfort with the current funding relationship, the existing funding company meeting its portfolio requirement for that specific case type, or the lawsuit lending company becoming uneasy with the lawsuit’s progression may make it necessary for a plaintiff to seek alternative funding.
One of the main reasons you might have to get a pre-settlement funding buyout involves the hierarchy of liens. There’s a sequential order of repayments, and a lawsuit loan company isn’t high on the list.
Attorney fees, case costs, expert witnesses, and medical liens (where applicable) always precede the reimbursement of a lawsuit funding company’s lien.
Since legal funding companies never secure the primary position and various elements can impact the ultimate settlement amount, having a single lien mitigates the risk of subsequent lienholders not receiving full reimbursement.
How Injury Wallet Can Help
Are you looking at lawsuit loan options for your case? Filtering out the best pre-settlement funding companies can be challenging when you don’t have any experience.
Fortunately, this is where Injury Wallet can help. We are not a lawsuit loan company, but we work with the best in the industry.
With an expansive network and years of experience, Injury Wallet can help you narrow down the best options for your particular case.
Whether you’re looking for an initial lawsuit loan or pre-settlement funding buyout options, let Injury Wallet match you with the best lender for your case. Apply Today!
