What Is Pre-Settlement Funding?
Pre-settlement funding, also known as a lawsuit cash advance, provides plaintiffs with non-recourse financial support during the prolonged litigation process. It’s designed to help cover essential living expenses, medical bills, and lost wages while a case is pending.
When used responsibly, legal funding may reduce financial pressure that can otherwise push personal injury plaintiffs toward premature or unfair settlements.
Because it’s not a loan, attorneys play a crucial role in promoting responsible use. They can help clients understand funding agreements, fee structures—particularly those with compounding costs—and the long-term financial impact of taking an advance, ensuring that pre-settlement funding functions as a financial bridge rather than a source of increased financial distress.
This guide explains how pre-settlement funding works from a plaintiff attorney’s perspective, including ethical considerations, cost transparency, and best practices for responsible use when working with a legal funding provider such as Express Legal Funding.
Use these takeaways to guide informed conversations with clients and make strategic funding decisions that protect their financial well-being.
How Does Pre-Settlement Funding Work for Attorneys in Plaintiff Litigation Cases?
From an attorney’s perspective, pre-settlement funding is a financial arrangement that operates independently of litigation strategy. The funding provider evaluates the claim’s merits and advances funds directly to the plaintiff, with repayment contingent solely on a successful outcome.
Non-Recourse Funding Structure Explained
Pre-settlement funding is non-recourse. Plaintiffs repay only if they recover funds by settlement or judgment. If the case fails, they owe nothing. This structure shifts financial risk away from the plaintiff and makes accurate case evaluation and cost transparency more important.
Because legal funding is not based on creditworthiness, income, or employment status, underwriting focuses primarily on the legal merits and potential value of the claim rather than the plaintiff’s personal finances.
Case Evaluation and Underwriting Criteria
Legal funding providers typically assess:
- Liability clarity and evidentiary support
- Damages, including medical expenses and wage loss
- Available insurance coverage or defendant assets
- Procedural posture and expected duration of litigation
Attorneys are not asked to provide legal opinions or disclose privileged communications. The review process is intended to verify case fundamentals, not influence legal strategy.
Relevant read: What Is Pre-Settlement Funding Underwriting: How It Works
Typical Funding Timelines and Disbursement
Once representation and case status are confirmed, funding decisions are often made within days. Approved advances are disbursed directly to the plaintiff and may be used at the client’s discretion, subject to the terms of the funding agreement.
The Attorney’s Role in the Pre-Settlement Funding Process
While the funding contract is between plaintiff and provider, attorneys serve in an advisory and procedural capacity, informing clients and facilitating the process as needed.
Information Attorneys Are Asked to Provide
Attorney involvement is generally limited to:
- Confirming representation
- Verifying basic case details
- Acknowledging notice of the funding interest in the claim
No guarantees, endorsements, or litigation commitments are required.
Lien Acknowledgment and Notice Obligations
Funding agreements typically include a lien or notice of interest that attaches to the plaintiff’s recovery. Attorneys are asked to acknowledge receipt of this notice to ensure that the funding obligation is addressed appropriately at settlement or judgment.
This acknowledgment does not create personal liability for the attorney and does not alter fiduciary duties to the client.
What Attorneys Are Not Responsible For
Attorneys are not required to:
- Guarantee repayment
- Advocate for the funding provider
- Share litigation strategy or settlement recommendations
- Prioritize the funding company over the client’s interests
Settlement authority remains exclusively with the client, advised by counsel.
Ethical Considerations for Plaintiff Attorneys
Beyond procedural responsibilities, plaintiff attorneys must also be mindful of ethical considerations when clients seek pre-settlement funding.
Attorney Independence and Client Decision-Making
Properly structured pre-settlement funding arrangements preserve full attorney independence. Funding providers do not direct litigation strategy, influence settlement decisions, or interfere with attorney-client communications.
Attorneys retain sole responsibility for legal advice and case management.
Champerty, Maintenance, and Legal Background
Concerns about champerty and maintenance differ by jurisdiction. Modern consumer legal funding agreements are structured to comply with state laws and regulatory standards.
Attorneys should remain aware of applicable case law, statutory frameworks, and state bar ethics guidance governing third-party legal funding in their jurisdiction.
Avoiding Conflicts of Interest
Transparency is essential for client trust and attorney independence. Attorneys should see that clients get a clear, plain-language disclosure of key funding terms. These include how fees build over time, how the payoff is calculated, and how repayment may impact net recovery. Clarity prevents misunderstandings that could cause conflict later.
Attorney review of the funding agreement is a practical safeguard. When counsel walks the client through the repayment structure, discusses projected payoff under realistic case-duration scenarios, and documents informed consent where appropriate, it creates a clear record that funding decisions were client-driven and fully informed.
This process helps insulate settlement advice from third-party financial influence and reduces the risk that funding arrangements will be perceived as affecting litigation strategy or attorney judgment.
Legal and Regulatory Landscape of Pre-Settlement Funding
State-by-State Regulation of Consumer Legal Funding
Some states regulate pre-settlement funding through disclosure requirements, fee limitations, contract formatting rules, or registration requirements. Other jurisdictions rely primarily on common law and general consumer protection statutes.
Attorneys should be mindful of how state-specific rules may affect funding agreements and enforcement.
Disclosure and Contract Requirements
Well-structured funding agreements clearly disclose:
- The non-recourse nature of the advance
- How fees accrue over time
- Repayment obligations upon resolution
These disclosures are essential for ensuring clients understand the true cost of funding.
Regulated vs. Unregulated Jurisdictions
In regulated states, statutory requirements may govern contract language and cost disclosures. In unregulated states, attorney review becomes even more important to ensure fairness and transparency.
As a result, attorney familiarity with applicable state laws and regulatory frameworks is essential to evaluating whether a particular funding agreement is appropriate for a given case.
Relevant read: Is Pre-Settlement Funding Legal in All States?
Costs, Fees, and Transparency in Pre-Settlement Funding
How Legal Funding Costs Accrue Over Time
Pre-settlement funding costs typically increase based on the length of time the advance remains outstanding. Because repayment occurs only after resolution, extended litigation timelines can substantially increase total repayment amounts.
Simple vs. Compounding Interest Rates and Fee Structures
Some funding agreements apply simple fees over fixed periods, while others use compounding interest structures that increase the balance at regular intervals. Compounding fees can significantly increase repayment amounts, particularly in cases that last longer than anticipated.
Attorneys should help clients evaluate projected repayment under realistic case-duration scenarios, not just initial advance amounts.
Common Industry Cost Concerns
Key cost-related concerns include:
- Aggressive compounding intervals
- Unclear fee calculations
- Inadequate disclosure of long-term repayment totals
Clear, plain-language agreements help mitigate these risks.
Responsible Use of Pre-Settlement Funding
Understanding risks and benefits is key to responsible funding. The following guidance clarifies when pre-settlement funding adds value and the circumstances under which it may introduce risk for clients.
When Pre-Settlement Funding Helps Clients
Pre-settlement funding may be appropriate when plaintiffs face genuine financial hardship that could otherwise force early settlement or case abandonment. Responsible use typically involves covering essential expenses such as housing, medical care, utilities, and basic living costs.
When Pre-Settlement Funding Can Create Financial Risk
Funding can increase financial strain when advances are excessive, costs are misunderstood, or litigation timelines are underestimated. In long-running cases, compounding fees may significantly reduce net recovery.
Many funding providers, including Express Legal Funding, offer capped contracts and simple interest rates designed to limit long-term cost growth.
The Attorney’s Role in Preventing Financial Harm
Attorneys help promote responsible use by:
- Reviewing funding agreements before execution
- Explaining cost structures and long-term implications
- Helping clients assess whether funding aligns with their financial and litigation goals
Attorney guidance helps ensure that legal funding reduces immediate financial pressure without creating future hardship.
In summary, responsible pre-settlement funding requires attorney involvement, clear cost disclosure, and funding amounts proportionate to the expected case duration and value. Always ensure clients understand terms and make decisions with long-term financial well-being in mind.
About Express Legal Funding
Direct Funding Model
Express Legal Funding provides direct pre-settlement funding without brokers or referral intermediaries, helping reduce unnecessary cost layers for plaintiffs.
Experience Working With Plaintiff Attorneys Nationwide
We work with plaintiff attorneys across the United States and understand the procedural, ethical, and regulatory considerations involved in consumer legal funding.
Commitment to Transparency and Attorney Collaboration
Our approach emphasizes clear disclosures, attorney review, and respect for attorney independence throughout the funding process.
Frequently Asked Questions for Plaintiff Attorneys
What should attorneys consider before a client accepts pre-settlement funding?
Attorneys should consider case strength, expected litigation duration, fee and interest terms, estimated case value, and total projected repayment. Reviewing the funding agreement and explaining realistic payoff scenarios helps ensure funding supports the client’s objectives and financial stability rather than creating unnecessary long-term risk or reducing net recovery.
Does pre-settlement funding create a conflict of interest?
No. When structured properly, pre-settlement funding does not interfere with attorney independence or client decision-making. The funding provider has no control over litigation strategy, settlement timing, or case outcomes. Attorneys retain full authority to advise clients and act solely in the client’s best interests.
Are pre-settlement funding agreements discoverable?
It depends. Discoverability varies by jurisdiction, court, and case-specific circumstances. Some courts have required disclosure, while others have limited or denied discovery requests. In addition, some states have enacted consumer legal funding statutes that restrict the discovery of funding agreements in certain situations.
Attorneys should evaluate local rules, controlling case law, and any applicable statutes when advising clients on disclosure risk and strategy.
How are funding liens handled at settlement?
Funding obligations are typically satisfied directly from settlement or judgment proceeds before funds are distributed to the plaintiff. The lien or notice of interest ensures repayment occurs at resolution. Attorneys are not personally liable for repayment and remain responsible only for proper disbursement consistent with client instructions.
Does pre-settlement funding affect settlement authority?
No. Settlement authority always remains with the client, advised by counsel. Funding providers do not influence settlement decisions, demand minimum settlement amounts, or control negotiation strategy. Attorneys retain full discretion to recommend a settlement based on the client’s legal and financial interests.
What role should attorneys play in reviewing legal funding agreements?
Attorneys play a critical advisory role by reviewing legal funding agreements, explaining fee structures, and helping clients understand long-term repayment implications. While attorneys are not parties to the contract, their review helps promote informed consent and responsible use of pre-settlement funding.
How do compounding fees impact long-term repayment?
Compounding fee structures can significantly increase repayment amounts over time, particularly in cases with extended litigation timelines. Attorneys should help clients evaluate projected repayment under realistic duration scenarios, not just initial advance amounts, to avoid unexpected reductions in net recovery.
How much pre-settlement funding is typically advisable?
There is no universal amount. Responsible pre-settlement funding generally involves advances limited to what is necessary to cover essential expenses. Excessive funding can increase financial risk, especially in long-running cases. Attorneys should help clients assess whether the funding amount is proportionate to the case value and expected duration.
Does pre-settlement funding replace legal or financial advice?
No. Pre-settlement funding is a financial product, not legal or financial advice. Attorneys remain solely responsible for providing legal guidance, and clients may benefit from discussing financial implications separately. Funding providers should not offer advice on litigation strategy or settlement decisions.
Are attorneys required to recommend or approve legal funding?
No. Attorneys are not required to recommend, endorse, or approve pre-settlement funding. Their role is limited to advising clients, reviewing agreements if requested, and acknowledging notice of the funding interest. The decision to pursue funding rests entirely with the client.
In what situations may pre-settlement funding be inappropriate?
Pre-settlement funding may be inappropriate for short-duration cases, highly speculative claims, or situations where projected costs are likely to outweigh the benefit of the advance. Attorneys should evaluate whether funding is necessary, proportionate to the case value, and consistent with the client’s financial needs and case goals.
Can pre-settlement funding make it more difficult to settle?
Yes. In cases with a modest expected net recovery—for example, a few thousand dollars after fees, costs, and liens—the funding payoff may materially reduce the client’s proceeds and make a reasonable offer less attractive, even when it reflects the case’s fair value.
Reviewing realistic payoff projections early helps clients understand likely net outcomes at different settlement points and reduces the risk that repayment pressure influences settlement decision-making.
Attorney Resources and Next Steps
Attorneys seeking additional information may request funding details, review compliance resources, or speak directly with Express Legal Funding’s attorney relations team to discuss procedural questions.
To speak with Attorney Relations, call Express Legal Funding at (888) 232-9223.