Structured Settlements and Litigation Financing

When the subject of litigation financing comes up, people usually have a general idea of what it means. But how it actually works and the consequences of using it are more of a mystery. The same goes for winning the lottery. People have an idea of what to expect, but in most cases don’t know what the entire process entails.

Financially speaking, winning the lottery and litigation financing are distant cousins. Both have very similar structures in the way people are paid when they receive the funding. A man goes to the store to pick up some milk for his family. While online waiting to pay, he plays the lottery just for the fun of it. The lottery is basically legal gambling. It was a legal answer to the underground numbers game people played in which the rules to play were very similar. He pays for his milk and with the lottery ticket still in hand goes home.

After falling asleep he wakes up just in time to hear the numbers. He checks his ticket and he has all the numbers. When he goes down to City Hall to collect his award, they give him the option of receiving a lump sum or getting it incrementally. Many don’t know that getting a lottery sum incrementally is basically a structured settlement. As defined, a structured settlement is when a person gets a statutory payment over a certain mandated time period. Once a lottery winner takes the option of getting paid over time, they have just agreed to a structured settlement.

The situation is similar when talking about litigation financing. Litigation financing is when a lawyer or plaintiff accepts funding either before the case starts or after the case settles to use at their own discretion. That could mean for lawyers, paying bills for other cases, which can be expensive. For the plaintiff, that could mean paying their bills to get them over the hump. In either situation, money is being paid over a statutory time period.

Structured settlements are ways to avoid costly trials, and litigation financing is a way to get much needed funds to plaintiffs to either pursue a lawsuit or advance a partial sum of the settlement towards the plaintiff. For some people, litigation financing is like winning the lottery. Given the long time period of a trial, a person can be wiped out very quickly depending on the defendant. An advance from a funding company can come at the right time or unexpectedly if they qualify and change their life-the same way a lottery ticket can be an unexpected surprise and change a person’s life. In either situation, both can really be a tool to help people.

Tagged , . Bookmark the permalink.

Leave a Reply