Pre-Settlement Funding for Workers’ Compensation Cases: Pros and Cons

There has long been debate about the use of pre-settlement funding for workers’ compensation cases. While the option has advantages and disadvantages, there are several core benefits and drawbacks that have been identified. Pre-settlement funding follows the claim process for a personal injury case, such as a workers’ compensation suit. It is a loan, which is allowed before the case is finished, and allows the victim to cover costs such as medical bills, legal fees, and other costs in the interim. It is also disputed by many who criticize it as an “unfair advantage” to the rich, since they have enough disposable income to accept the loan and use it to pay expenses while they wait for case resolution.

Pros of Pre-Settlement Funding

For individuals who are not able to pay their medical bills and other costs associated with legal fees, pre-settlement funding can be a lifesaver. It can provide the means to pay their immediate expenses while they wait for the lawsuit to be settled. The purpose of this kind of funding is also to help injured workers protect themselves and give them peace of mind in the event that their claims are denied or denied at trial.

Pre-settlement funding also allows injured workers to avoid having to take a loan from a bank or other financial institution. This can be especially beneficial to those that lack access to traditional loan products. Furthermore, pre-settlement funding can provide a way of getting access to a lump sum of money in order to cover medical expenses and other costs associated with the claim process, whereas bank loans usually require payments overtime.

Finally, pre-settlement funding can provide the option of a non-recourse loan, meaning there is no collateral for the loan. This means that if the case is denied or lost, the injured worker would not be on the hook for the loan amount. Furthermore, when the case is resolved, the claimant simply has to use the settlement funds to pay off the loan, and any money left over is theirs.

Cons of Pre-Settlement Funding

While pre-settlement funding does provide some potential benefits for injured workers, it also has some drawbacks. Foremost, there is the cost of the funding itself. Usually, these loans come with a financing charge, which can be high and can be the biggest source of concern when considering the use of pre-settlement funding.

Additionally, since pre-settlement funding is a form of loan, failure to repay the loan could lead to negative credit consequences, which is something all claimants should consider carefully when deciding whether to accept such a loan.

Finally, there is the issue of trial lawyers taking advantage of pre-settlement funding to “cash in” on their client’s settlements. While trial lawyers may not be obligated to inform clients of all their available options, such as pre-settlement funding, the risk of attorneys pushing their clients into such a transaction is real and should be taken into consideration before entering into such an agreement.

Conclusion

Overall, pre-settlement funding for workers’ compensation cases can be a valuable resource for those with limited access to traditional financing options. It can provide the funds needed to pay for expenses in the interim, and give claimants some peace of mind and protection if their claim is lost or denied at trial.

However, before accepting pre-settlement funding, claimants should consider the cost of the funding itself and the potential consequences of failing to repay the loan. They should also ensure they are aware of all of their financing options, and ensure their trial attorney is not taking advantage of them. If they decide the benefits outweigh the risks, then pre-settlement funding might be the right choice for them.