LAWSUIT LOAN
On Bankruptcy & Debts Law for residents in Canada
A lawsuit loan is a cash advance against the proceeds of a pending lawsuit. Lawsuit loan is really not a loan because it is made on a non-recourse basis. A person has to repay the "lawsuit loan" when an out-of-court settlement occurs or the person wins the lawsuit. Lawsuit loans or, more correctly, lawsuit advances are made across Canada except Quebec.
In Canada, lawyers are allowed to refer clients (persons who wish to file a lawsuit) to services and companies that can offer help for lawsuit loan or advance. For example, a lawyer can refer a client to a specialized lawyer.
Lawsuit loan or lawsuit advance helps in paying living expenses while waiting for lawsuit to work its way through the legal system in Canada, which can takes months, even years.
“Contingent” Or “Non-Recourse” Advance
A lawsuit loan is a contingent or non-recourse advance in the sense that repayment of the advance by the person (plaintiff) running the lawsuit is "contingent" on the resolution of the lawsuit. In case person (plaintiff) losses the lawsuit and did not receive any payment from the defendant, the liability for repayment of the loan/advance gets over on the part of the plaintiff.
Lawsuit Loan Different Than a Conventional Loan
Conventional loans must be repaid regardless of the person’s ability to repay them. A lawsuit loan or lawsuit advance needs to be repaid only if and when the person wins the lawsuit at trial, or out-of-court settlement arrives. That's why a lawsuit loan is really not a loan at all.
Amount of Loan to be Received
The amount of loan a person receives depends on the probable value of the total claim and its chances for a favorable outcome. Generally, a person is free to request any amount.
Contingent Advance More Expensive Than a Bank Loan
A contingent advance and a bank loan are different. Person (plaintiff) taking loan are not required to repay contingent or non-recourse advance if they lose their case or do not receive payment from the defendant(s). However, if a person recovers proceeds from the lawsuit will pay a size able premium for the advance. The premium is considerably higher than any interest that would pay for a bank loan. Bank loan must be repaid regardless of winning or loosing the lawsuit.
Time Taken For Receiving an Advance
The lawsuit funding company will evaluate every case/lawsuit before a decision can be made. In each case, the funding company might need to speak to the client’s lawyer and require his/her cooperation. Some cases have been funded within 48 hours, while others can take several weeks.
Lawsuit Settlement
Many cases are “settled” out of court by the parties. This usually means that the defendant will compensate the plaintiff for his/her damages without going to trial.
