The Democratized Future of Litigation Funding & How to Get a Piece of It

| Updated on March 21, 2024

Did you ever think that one day, you could invest in lawsuits and get a cut of the settlement as a regular investor? Neither did we. But litigation funding is now a reality.

Litigation funding has been around for a while. Originally it was only available to large companies or the wealthy. But now, with the rise of online platforms, anyone can invest in lawsuits and get a piece of the settlement. 

This has led to a democratization of litigation funding, and it’s now possible for regular investors to make money by backing lawsuits. So how does it work? And, more importantly, how to add this investment to your portfolio? Read on to find out.

What is Litigation Funding Exactly?

Third-party funding, or litigation funding, is a type of investment opportunity that supports the costs of legal action. 

It can cover the costs of expert witnesses, court fees, and other legal expenses. Litigation funding is often needed in cases when people don’t have the money to cover the legal fee cost.

For example, if you are hurt in Florida but aren’t from the area, you may have some trouble finding people who can help. You’ll need money to find injury attorneys in Gainesville, cover living expenses, and pay for the costs of your suit. Litigation funding can help.

It can also assist victims of civil rights violations take legal action against their abuser. In some cases, litigation funding can also be used to help wrongfully convicted people in clearing their name and receive compensation for their wrongful imprisonment.

The Benefits of Third-Party Funding

Third-party funding can help when someone is injured due to another person’s negligence. They can incur significant medical bills, lost wages, and other costs. Pursuing a personal injury lawsuit can be expensive, in times of need, litigation funding can help.

This is where litigation funding comes in. Litigation funding allows plaintiffs to receive the money they need to pursue their case without having to front the entire cost themselves. Instead, they can take out a loan against their case’s anticipated settlement or verdict.

If they lose the case, they usually won’t have to repay the loan. For many people, financial assistance provides the security they need for pursuing their claims and get the compensation they deserve.

Litigation funding can also level the playing field in personal injury cases. When one side has heavy pockets, and the other doesn’t, a fair trial isn’t guaranteed. 

However, with litigation funding, both sides have the same opportunity to pursue their case and present the evidence. This can result in a more just outcome for the plaintiff.

In addition, litigation funding can help ensure that cases with merit aren’t dismissed simply because the plaintiff cannot afford to pursue them. By providing financial assistance, litigation funding can help plaintiffs get access to justice.

How Does It Work?

Litigation funding is typically provided by third-party companies, not the plaintiff’s lawyer. These companies evaluate the merits of the case and decide whether or not to provide financing.

If they decide to fund the case, they will give the plaintiff a loan that is typically repaid out of the proceeds of the settlement or verdict. The amount of money loaned to the plaintiff is the expected legal cost of the case.

The loan plus interest is generally paid back to the funding company out of the proceeds of the settlement or verdict.

Litigation funding can cover court fees, expert witness fees, and the costs of gathering evidence.

Some plaintiffs have also received money to cover their living expenses while their case is going on. This can be especially helpful for plaintiffs who have suffered a severe injury and cannot work.

It’s a relatively new concept, but it is becoming popular as more people learn about it. Considering pursuing a personal injury claim, you can use litigation funding to help cover the costs.

How to Invest in Litigation Funding

First, it’s essential to understand the different types of litigation funding available.

Many investors choose to invest in pre-settlement funding, which provides financing to plaintiffs before their case is resolved. This type of funding can cover living expenses and other costs associated with the matter.

Other investors prefer to invest in post-settlement funding, which provides financing to plaintiffs after their case is resolved. It can cover legal fees and additional costs associated with the case.

You can also mix things up and create a portfolio, which is usually done by a manager who brings many different investors together to help fund multiple cases.

Various other types of litigation funding are available, including contingency fees and structured settlements. It’s important to understand the pros and cons.

Second, it’s essential to consider the risks involved in investing in litigation funding. Like all investments, loss can always happen. Before investing, be sure to research the risks and potential rewards involved.

Third, consult with an experienced attorney. A seasoned attorney can help you understand the legalities involved in investing in litigation funding and can provide guidance on how to protect your interests best.

Finally, be sure to review all documents before going to court. If you’re going at this kind of opportunity solo, be sure you understand all terms and conditions associated with the investment before moving forward.

Here’s the TLDR of the pros and cons.

  • It can be a way to earn a high return on investment.
  • It can be used to finance plaintiffs who may not be able to afford to pursue their case otherwise.
  • It can help plaintiffs cover the costs of their case, including court and expert witness fees.
  • It can be used to cover living expenses while a case is pending.
  • There is always the potential for loss.
  • The terms of the investment can be complex.
  • It’s important to consult with an experienced attorney before making any decisions.

An investor should approach it with the same due diligence as any other investment. By understanding the risks and potential rewards associated with the litigation funding, you can make a sound investment decision.

The Takeaway

If you’re looking to diversify your portfolio in a market where other opportunities aren’t looking great, this could be the perfect option for you as an investor.

John M. Flood

John is a crypto enthusiast, Fintech writer, and stock trader. His writings provide guides to perform your best in the crypto world and stock planet. He is a B-Tech graduate from Stanford University and also holds a certification in creative writing. John also has 5 years of experience in exploring and understanding better about the FinTech industry. Over time, he gained experience and expertise by implementing his customized strategies to play in the crypto market.

Related Posts