Do Lawyers Give Advances on Settlements in California?

When you are recovering from injuries and waiting for a settlement in California, we understand that financial pressures can build quickly. Medical bills, lost wages, and other expenses related to the accident can become overwhelming. You might wonder, “Do lawyers give advances on settlements in California?” Below, our Los Angeles personal injury lawyers discuss this topic if you are considering filing an injury claim or have already filed one. 

Do California Personal Injury Lawyers Provide Advances on Settlements?

Most personal injury lawyers in California, like us, work on a contingency fee basis. This fee structure means your attorney does not get paid unless they win or settle your case. Regardless of an individual’s financial situation, a contingency fee structure allows individuals access to the legal services they need. It also ensures your attorney is invested in the success of your case because they have a stake in it.

An emergency sign on the hospital building

In most personal injury lawsuits, your attorney will handle all of the upfront costs of handling and litigating your case. They will then get reimbursed for their expenses and legal fees if they reach a fair settlement or verdict on your behalf. Examples of expenses your attorney may cover include, but are not limited to:

  • Filing fees
  • Court fees
  • Investigation costs
  • Deposition costs
  • Expert witness costs

We understand that calculated lost wages, medical bills, and other accident expenses, in addition to your regular living expenses, can quickly become overwhelming. It can be difficult to wait for your settlement funds. 

Providing advances on settlements or giving a client money for living expenses or any personal or business reasons is subject to legal ethics rules. Depending on your situation, your California attorney may be able to offer you a loan. 

Is It Legal for My Personal Injury Attorney to Give Me a Loan?

In California, lawyers can give their clients loans by following particular ethics rules. Our Los Angeles personal injury lawyers discuss these laws below: 

American Bar Association (ABA) Model Rules of Professional Conduct

Under Rule 1.8(e) of the American Bar Association’s Model Rules of Professional Conduct, lawyers are prohibited from providing financial assistance to clients in connection with pending or contemplated litigation. According to the ABA, the only exceptions include:

  • Advancing court fees and expenses of litigation, with repayment contingent on the case’s outcome
  • Advancing court fees and expenses of litigation when representing an indigent client
  • A lawyer representing an indigent client pro bono may provide modest gifts to the client for food, rent, transportation, medicine, and other basic living expenses

Basically, lawyers cannot provide financial assistance to clients except to advance litigation costs, like court fees and filing fees. If a lawyer is handling a case pro bono or for free, they can offer modest money gifts for basic living expenses.

The State Bar of California’s Rules of Professional Conduct

The State Bar of California’s Rules of Professional Conduct also prohibits attorneys from lending money to clients for personal or business expenses. However, Rule 1.8.5(b) Payment of Personal or Business Expenses Incurred by or for a Client does provide an exception. It says the following: 

  • After the lawyer is retained by the client, [the lawyer may] agree to lend money to the client based on the client’s written promise to repay the loan, provided the lawyer complies with rules 1.7(b), 1.7(c), and 1.8.1 before making the loan or agreeing to do so.

A loan agreement printed on a paper

An attorney may be able to offer a loan for reasonable living expenses. However, the loan must comply with multiple California ethics rules. If you are facing significant financial stress, talk to your Los Angeles personal injury attorney about whether a loan under Rule 1.8.5 may apply to your case. 

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Keep in mind that your attorney may still not agree to a loan. Loans are often seen as a conflict of interest to the attorney-client relationship and could risk an ethics violation and your attorney’s law license. 

Can I Switch My Lawyer?

Yes, you have the right to switch your lawyer if they are not adequately representing or assisting you with your personal injury lawsuit. However, changing your attorney because they refuse to give you a pre-settlement loan may not be in your best interest. If your attorney has been diligently working on your case and representing your best interests, switching because of the loan issue may mean you lose out on their experience and skill, potentially hurting your case.

While your attorney might not provide a lawsuit loan, you should keep them updated about your financial situation and concerns. They may know other resources or avenues for assistance with medical bills and living expenses you have not considered. They may also be able to refer you to a reputable lawsuit loan company for pre-settlement funding. If your attorney refuses to help you, consider requesting a second opinion from another law firm.

Can You Borrow Money From a Pending Lawsuit? 

Individuals may be able to borrow money from pending personal injury lawsuits through a process known as lawsuit funding or pre-settlement funding. Third-party companies called legal funding companies offer these types of loans or advances.

How Do Lawsuit Loans Work?

Lawsuit loans, often called pre-settlement funding or lawsuit advances, offer plaintiffs a way to access funds while their case is still in progress. They can provide financial assistance to individuals facing financial hardships from lost wages, mounting medical bills, and other losses from their accident. 

A rescue person putting bandages on a man who got on an accident

 

These advances are non-recourse loans. The plaintiff is only required to repay the cash advance if they win or settle their case, and it comes out of the settlement or verdict. If the plaintiff loses, the funding company cannot pursue the plaintiff’s other assets or income to recover its money. 

How to Get a Loan on Your Expected Settlement

If you are considering a settlement advance, third-party funding companies exist that provide lawsuit loans. Generally, getting a lawsuit loan includes the following process: 

  • Filling out and submitting an application. First, you must apply for a lawsuit loan with the pre-settlement funding company. This application typically involves providing a few details about yourself and your case.
  • Funding company talks to your lawyer. Once you apply, the funding company will review your information. If the company moves forward with your application, it will want to talk to your lawyer to get more information about the details of your case. 
  • Funding company may approve your application. If the funding company believes your case has a high chance of settling or winning at trial, it may approve the cash advance. The amount approved for a lawsuit loan is typically a portion of the expected settlement amount.
  • Entering into an agreement. You must review and sign an agreement if the lawsuit loan company approves your application. This document outlines the loan amount and the terms of the pre-settlement advance.
  • Receiving funds. Once you sign the agreement, the funding company should release the funds.

A woman typing on the laptop while another woman holds a pen and a form

What Are the Benefits of Pre-Settlement Lawsuit Loans?

A few of the benefits that these companies claim include:

  • Easy application process. According to many pre-settlement funding companies, the application is easy. Once you provide a few details to the company about yourself and your case, it will want to speak with your attorney for more information. 
  • Quick money. Many lawsuit loans or cash advance settlement companies market that you can obtain money quickly, sometimes within the same day of applying. Additionally, you can use these lawsuit loans for living expenses, medical expenses, or any day-to-day expenses. 
  • Risk-free. Pre-settlement lawsuit loans are non-recourse loans, meaning you do not have to repay the loan if you do not win your case. 
  • No credit checks. Unlike traditional loans, lawsuit funding typically does not require a credit check. Instead, funding decisions are based on the merits of your personal injury case.

While approved pre-settlement funding can guarantee emergency financial assistance for living expenses and other costs, our Los Angeles personal injury lawyers recommend approaching a lawsuit loan with caution. It is not without its potential drawbacks. 

One of the main concerns about lawsuit funding is the potentially high interest rates and fees. Generally, when you win your case, you will pay back interest and fees in addition to the cash advance. These fees can accumulate if your case takes a long time to settle or win. You could end up owing a significant portion of your settlement to the funding company.

We recommend discussing the loan terms with your attorney before signing anything. Your attorney can ensure you do not sign anything that is not in your best interest.

A lawyer working with his laptop with a gavel in front of him

Schedule a Free Consultation With Our Los Angeles Personal Injury Lawyers

Have you or a loved one been injured due to someone else’s negligence? You may be eligible to recover financial compensation for your losses through a personal injury lawsuit. We understand that money may be a concern in seeking legal help. At the Law Offices of Steers & Associates, we offer a free initial consultation to help you understand your legal options and determine if we can help you with your case. 

When we take a case, we work on a contingency fee basis. This means you do not have to worry about upfront costs, and we do not get paid unless we win your case. Do not hesitate to learn more about your potential legal options. There is no risk to you. Call us today at (800) 824-5416 or submit our online contact form.