Can My Lawyer Deny Me From Getting A
Pre Settlement Loan?
Article Outline
Introduction 📖
What is a Pre Settlement Loan?
💸
- Definition and Overview
- How Pre Settlement Loans Work
- Repayment Process
- Costs and Fees
Why Might a Lawyer Deny a Pre
Settlement Loan? ❌
- Ethical and Fiduciary
Responsibilities
- Concerns About Impacts on the
Case
- Doubts About Repayment Capacity
Factors That Determine
Approval of Loan 📝
- Case Merits and Value
- Plaintiff Need and Financial
Situation
- Lender Underwriting Criteria
- Lawyer's Assessment and
Recommendation
How to Get Approval for a Loan
✅
- Communicate Your Need Clearly
- Select an Established
Lender
- Offer Reassurances to Your
Lawyer
- Bolster Your Case
- Consider Alternatives
Alternatives to Pre Settlement
Loans 💡
- Borrowing from Friends or
Family
- Credit Cards or Bank Loans
- Settlement Advance Companies
- Payment Plans with Providers
- State Benefits
When a Loan Makes Sense 💯
- Urgent Financial Difficulties
- High Likelihood of Favorable
Settlement
- Limited Other Options
Conclusion 🏁
FAQs About Lawyer Approval for Pre Settlement Loans
Introduction 📖
If you have filed a personal
injury lawsuit and are waiting for settlement, obtaining a pre settlement loan
can provide much-needed cash as your case proceeds. These loans use your
pending legal claim and expected settlement as collateral to provide an advance
on proceeds. However, because they carry high fees and interest rates, your
lawyer may deny approval to protect your best interests.
In this detailed guide, we will
explore reasons a lawyer may prohibit these loans, how to potentially get their
approval, alternatives to consider, and when loans may make sense despite your
attorney's objections. Let's dive in to understand how you can get urgently
needed funds against a pending settlement even if your lawyer's initial
response is to deny consent.
What is a Pre Settlement Loan? 💸
To understand why your attorney
may object to these loans, it is helpful to first understand what exactly pre
settlement loans are and how they work:
-
Definition and Overview
A pre settlement loan, also
called a settlement advance, provides plaintiffs with cash upfront to cover
expenses while a lawsuit is pending, before final resolution or settlement. The
loan is secured against the potential value of a future settlement or court
award. If approved, the plaintiff receives an immediate lump sum payment in
exchange for repaying the loan plus fees out of their eventual settlement or
judgement.
-
How Pre Settlement Loans
Work
The process works as follows:
1. Plaintiff applies for loan
based on a pending legal claim
2. Lender assesses merits of case
and projected settlement amount
3. If approved, plaintiff
receives lump sum cash advance
4. When case settles, loan is
repaid from the total settlement amount
5. Lender collects loan amount
plus fees/interest from settlement
-
Repayment Process
Most lenders get repaid when the
case settles and funds are disbursed. The lender will take their fees and
interest directly from the total settlement amount before dispersing the
remaining proceeds to the plaintiff. This ensures they get paid back.
-
Costs and Fees
Given the risks of lending
against uncertain legal outcomes, pre settlement loan interest rates are
typically very high, often exceeding 100% APR when accounting for fees.
Repayment amounts can seriously reduce net settlement proceeds.
Why Might a Lawyer Deny a Pre Settlement Loan? ❌
There are some valid reasons
an attorney may discourage or outright deny their client obtaining a pre
settlement loan:
-
Ethical and Fiduciary
Responsibilities
Lawyers have an ethical duty to
represent the best interests of their client, not just legally but also
financially. High fees or repayment terms that extract significant portions of
a settlement may be against a client's long-term interests.
-
Concerns About Impacts on
the Case
Informing the defense about a pre
settlement loan could potentially jeopardize settlement negotiations. The other
side may try to use that information to negotiate a lower settlement offer.
-
Doubts About Repayment
Capacity
If the lawyer believes the case
has weaknesses that jeopardize settlement, they may doubt the client's ability
to repay the loan. Approving a potentially unrepayable loan could harm the
client's finances.
Factors That Determine Approval of Loan 📝
There are several important
factors that may influence a lawyer's willingness to approve a pre settlement
loan:
-
Case Merits and Value
The stronger the evidence of
liability and higher the probable damages, the more assurance of repayment
making approval more likely. Weak cases are riskier.
-
Plaintiff Need and
Financial Situation
Urgent financial distress like
inability to pay medical bills makes a lawyer more inclined to approve loans
despite misgivings.
-
Lender Underwriting
Criteria
Established lenders with prudent
underwriting practices only approve loans against strong cases. This reassures
attorneys about repayment.
-
Lawyer's Assessment and
Recommendation
The lawyer's judgment of the case
merits and confidence in a favorable resolution inform their decision. Their
recommendation carries weight.
How to Get Approval for a Loan ✅
If you need a pre settlement
loan but your lawyer has denied approval, there are steps you can take to get
consent:
-
Communicate Your Need Clearly
Have an open discussion about
your financial hardships and urgent need for temporary funds. Transparency can
elicit advice and solutions.
-
Select an Established
Lender
Work with a reputable lender with
fair fees and terms. This assures the lawyer that the lender's practices are
not exploitative.
-
Offer Reassurances to Your
Lawyer
Alleviate concerns by agreeing
not to inform defendants about the loan and to get required approvals in
writing from the lender.
-
Bolster Your Case
Provide evidence and highlight
details that demonstrate liability, negligence, damages and the likelihood of a
favorable settlement.
-
Consider Alternatives
Discuss options like borrowing
from family or settlement advance companies which may address objections.
Alternatives to Pre Settlement Loans 💡
If unable to obtain approval
for a pre settlement loan, lower-cost alternatives to discuss with your lawyer
include:
-
Borrowing from Friends or
Family
Borrowing from people you know
often has more reasonable terms, if available. There are no fees, just interest
and principal repayment.
-
Credit Cards or Bank Loans
Personal loans or credit cards
from mainstream lenders have much lower interest rates and clear repayment
terms.
-
Settlement Advance
Companies
Settlement advance companies
catering to plaintiffs provide cash advances at lower costs than predatory
lenders.
-
Payment Plans with
Providers
Making payment arrangements for
reduced fees or extended repayment timing with treatment providers is often an
option.
-
State Benefits
Programs like Medicaid,
disability insurance and workers compensation provide assistance if an injury
prevents working.
When a Loan Makes Sense 💯
Though most attorneys advise
against pre settlement loans, there are situations where they may be
reluctantly approved as the best option:
-
Urgent Financial
Difficulties
An inability to pay for basic
living expenses may necessitate accessing funds against a potential settlement,
if disapproval would create undue hardship.
-
High Likelihood of
Favorable Settlement
A loan can make sense with a
clear liability, high damages, and expectations of a sizable settlement, making
repayment extremely likely.
-
Limited Other Options
If a plaintiff has poor credit,
no collateral, and no family or friends who can help financially, a pre
settlement loan may be a last resort.
Conclusion 🏁
In summary, lawyers often deny
approval for pre settlement loans due to ethical obligations, case concerns,
and repayment doubts. Factors like plaintiff need, lender practices, and case
merits all contribute to the decision. Communicating urgency, selecting
established lenders, reinforcing your case strength and investigating
alternatives can help secure consent. While advice is generally to avoid these
loans, dire needs or a solid case may persuade an attorney to reluctantly
agree.
FAQs About Lawyer Approval for Pre Settlement Loans
What is considered urgent financial need when considering a pre settlement
loan?
Urgent financial needs
justifying a pre settlement loan include:
- Outstanding medical bills and
ongoing treatment costs related to the injury
- Loss of wages due to inability
to work after an accident causing hardship
- Major home, vehicle or
appliance repairs needed after an accident
- Basic living expenses like
rent/mortgage, utilities, food if unaffordable
- Any other critical expenses
arising due to accident that cannot be delayed
How can I demonstrate strength and value of my case to improve chances of
loan approval?
You can highlight a strong
case by providing evidence of:
- Clear liability and negligence
shown through documentation like police reports, investigator findings, witness
accounts etc.
- Extensive medical records,
doctor prognoses detailing injuries, treatments undertaken and required future
care
- Poor initial settlement offers
implying the case value exceeds the amount offered
- Ongoing lost income if injuries
prevent returning to work
- Hiring an experienced personal
injury attorney who can realistically assess the potential damages
Showing these facets provides
confidence your pending settlement will exceed any loan amounts.
What questions should I ask lenders when selecting one to improve approval
odds?
Key questions to ask potential
lenders include:
- What are your underwriting
criteria and what do you require to approve loans?
- What is the minimum settlement
success rate for cases required for you to approve a loan?
- How long have you been in
business providing pre settlement loans?
- What are your interest rates,
fees, and repayment terms, both maximums and averages?
- Do you offer flexible repayment
options tailored to individual needs?
- Are you willing to discuss the
loan with my attorney to address any concerns?
Vetting the lender thoroughly helps
improve the chance your lawyer feels comfortable approving.
If my lawyer says pre settlement loans are a bad idea, should I go against
their advice?
You generally should not go
against your attorney's advice regarding pre settlement loans. Your lawyer has
a fiduciary duty to protect your best interests, both legally and financially.
Before pursuing a loan they have discouraged, have an open conversation about
the reasons for their objections and discuss possible alternative solutions to
your financial issues.
What options other than pre settlement loans might provide fast funds in a
pending injury case?
Alternatives to pre settlement
loans that may provide quick funds include:
- Requesting an advance
settlement payment from the defendant's insurance company
- Payment plans and fee
reductions with medical providers
- State benefits if injury
prevents working including disability, Medicaid, workers compensation
- Borrowing from retirement
accounts against future settlement
- Borrower loans from
friends/family or home equity loan
- Low-interest credit cards or
personal bank loans
- Settlement advance companies
with better terms than predatory lenders
Can I get approval for a pre settlement loan if my lawyer already declined
it?
It is very difficult to get
approval if your lawyer has already denied consent for a pre settlement loan.
Lenders heavily rely on the attorney's assessment of the case merits, so their
declining carries great weight. Before revisiting the request, research lenders
thoroughly, explain your urgent need, and offer reassurances about protecting
the case. If your lawyer still refuses after this discussion, seek out
alternatives.
What percentage of my potential settlement proceeds can I typically get
with a pre settlement loan?
The maximum amount you can borrow
varies, but most established lenders limit pre settlement loans to 10-20% of
the anticipated settlement value projected by your attorney. Some may provide
up to 30% depending on case details. As an example, for a $100,000 expected
settlement, you may qualify for a $10,000 to $20,000 cash advance in most
cases.
How soon after getting a pre settlement loan would I need to start making
repayments?
The exact repayment timing
depends on the specific loan terms you agree to. Many lenders get paid directly
from the settlement when it is disbursed, immediately deducting what is owed.
Others allow more flexibility, but you typically must begin making repayments
within 6-12 months after receiving the pre settlement loan even if the case has
not resolved yet.
Can I be denied a loan even if my attorney consents and I have a seemingly
strong case?
Yes, you could still be denied a
pre settlement loan even with your attorney's approval and what appears to be a
solid case with a high probability of settlement. The lender makes the ultimate
decision based on their own analysis of risks versus rewards, regardless of you
and your lawyer's confidence. They may identify weaknesses overlooked or feel
the case has insufficient merits to warrant loan approval.
What options do I have if I am denied a pre settlement loan?
If you are denied a pre
settlement loan, potential options include:
- Discussing case evidence with
your lawyer to bolster merits and reapply to same lender
- Applying with alternative
lenders who use different underwriting criteria
- Seeking out settlement advance
companies catering to plaintiffs
- Exploring borrowing options
from family and friends
- Negotiating payment plans,
reductions, or write-offs with healthcare providers
- Utilizing credit cards or a
personal loan from your bank at lower interest
- Investigating state/federal
financial assistance programs you may qualify for
- Asking the court for an advance
on settlement for financial hardship
Are pre settlement loans ever a good idea if my lawyer recommends against
them?
Pre settlement loans are
rarely a good idea against your lawyer's advice except in very limited
circumstances, such as:
- You cannot pay basic living
necessities like rent, utilities, food for yourself or dependents without the
loan
- The potential settlement far
exceeds any loan amount making repayment assured
- You have no other viable
options to borrow money and urgent expenses exceed your income
Even in cases meeting these
criteria, discuss concerns with your lawyer and research lenders thoroughly
before deciding to proceed against counsel.
What other precautions should I take if I decide to apply for a loan over my
lawyer's objections?
If you pursue a pre settlement
loan despite lawyer objections, some precautions include:
- Thoroughly vetting the lender
for fair rates, flexible terms and responsible practices
- Only borrowing the absolute
minimum amount needed
- Keeping loan details
confidential from the defense
- Getting approvals and terms in
writing from the lender
- Maintaining records of all
correspondence, receipts, forms
- Following up repeatedly until
receiving the written loan agreement
- Reviewing the final agreement
carefully before signing
- Avoiding spending beyond
absolute necessities until the case settles
Taking these steps provides
additional protections in case issues arise later.