The process of applying for and receiving post-settlement funding is straight-forward and quick for those who follow the funder’s guidelines. However, once a law firm gets the money, attorneys often are concerned about what happens if their settlement is held up longer than expected or if other issues come up.
An attorney does have some obligations to the funder after receiving money including the following:
- Provide updates as they occur with regard to the matter funded
- Forward copies of any petitions filed with the court subsequent to funding
- Forward copies of any court orders entered subsequent to funding
- Advise immediately of any anticipated delays in receipt of payment of attorney’s fee
- Advise when payment of fee is received
An attorney’s obligation to pay back the funder does not arise until the settlement funds are received by the attorney. Once those funds clear in the attorney’s escrow account, he/she must immediately transfer the assigned portion of the legal fee to the funder. This is an important point. Because post-settlement funding is not a loan, payment is not required by a certain due date and there are no monthly payments. Moreover, there are no pre-payment penalties, so funding can be paid off partially or completely at any time prior to receiving the settlement funds.
What if it looks like the settlement won’t be paid through no fault of the attorney? The advantage of post-settlement funding is that it is nonrecourse. That means if for some reason the underlying payor (insurance company or government agency, for example) fails to ultimately pay the settlement, the attorney no longer has an obligation to repay the funder, as long as there was no malfeasance on the attorney’s part. This is true even in the case of a class action where the attorney received funding before the settlement was finally approved and subsequently the settlement was not finally approved.
To learn more about how post-settlement funding can help your firm, visit RapidFunds® Frequently Asked Questions page or contact Sherry Foley, Esq. at sfoley@rapidfunds.com for more information.