Litigation Funding (And Loans)
Dec. 23, 2022
Litigation funding and litigation loans are similar in that they both involve providing financial assistance to individuals or businesses involved in a legal dispute. However, there are some key differences between the two types of financing.
Litigation funding refers to the practice of providing financial assistance to individuals or businesses involved in a legal dispute, such as a lawsuit or arbitration, in exchange for a share of any eventual settlement or judgment.
Litigation loans, on the other hand, refer to loans that are specifically designed to provide financial assistance to individuals or businesses involved in a legal dispute. Like any other loan, litigation loans require the borrower to repay the loan with interest, regardless of the outcome of the case. Litigation loans may be provided by banks, specialized lending firms, or other financial institutions.
Overall, the main difference between litigation funding and litigation loans is that litigation funding does not require repayment if the case is not successful, while litigation loans do. This can make litigation funding a more attractive option for individuals or businesses who may not have the financial resources to repay a loan, but it also means that the funding is typically more expensive, as the provider is taking on more risk.
Litigation funding is often provided by specialized firms or investors who are willing to advance money to plaintiffs or defendants in exchange for a share of any eventual settlement or judgment. This can be an attractive option for individuals or businesses who may not have the financial resources to pursue a legal dispute on their own.
There are several types of litigation funding, including contingency funding, which is based on the outcome of the case, and non-recourse funding, which does not require the recipient to repay the funding if the case is not successful.
Funding In New Jersey
Litigation funding is generally legal in the state of New Jersey. However, there are certain laws and regulations that govern the use of litigation funding in the state, and it is important for individuals or businesses considering seeking funding to be aware of these rules.
Specifically, New Jersey has a statute that specifically regulates the use of litigation funding in the state. This law requires that any person or entity engaged in the business of providing litigation funding must be licensed by the state and must adhere to certain requirements, such as disclosing the terms of the funding agreement to the recipient and maintaining certain records.
Additionally, the use of litigation funding may be subject to ethical rules and considerations, particularly if the funding is being provided to an attorney who is representing a client in a legal matter. Attorneys have a duty to protect the interests of their clients and to avoid conflicts of interest, and seeking litigation funding may implicate these duties.
To Fund Or Not To Fund
Whether litigation funding is a good idea for a personal injury case will depend on the specific circumstances of the case and the individual seeking funding. In general, litigation funding can be a useful option for individuals who do not have the financial resources to pay for the costs of pursuing a legal action, such as legal fees and expert witness fees.
However, it is important to carefully consider the terms of any litigation funding agreement, as these agreements may require the recipient to pay back the funding with interest if the case is not successful. This could result in the recipient owing more money than they received in funding, which could be financially burdensome.
Additionally, it is important to be aware that litigation funding is a complex and potentially risky area, and individuals considering seeking funding should carefully research their options and seek legal advice before making a decision. It may be helpful to consult with an experienced personal injury attorney, who can provide guidance on the potential risks and benefits of litigation funding and help the individual assess whether it is a viable option in their specific case.