What is Litigation Funding?
Litigation Funding has a few different angles to it.
Here is the general definition from Wikipedia:
Litigation funding (aka lawsuit loan, plaintiff cash advance, legal financing) is a practice in which individuals who are plaintiffs in lawsuits receive money from firms and individuals who take a lien on the proceeds of a personal injury suit in return for ready cash. It is not considered a loan as the money does not have to be repaid if the plaintiff's law suit is unsuccessful; it is nonrecourse debt. Funding companies also advance money to attorneys against anticipated legal fees earned in a personal injury matter.
The first is often called pre-settlement funding and is money that is paid directly to the plaintiffs (the party in the lawsuit). It is true that this advance is non-recourse, which means that it does not have to be paid back if the case is not successful.
The second angle is when money is advanced to law firms in anticipation of their legal fees that they may earn when a case settles or is resolved via a verdict.
A third angle is when the money is advanced to pay expenses of a lawsuit. This money is not paid out to the lawyers as a fee or to the plaintiffs. It is used only to hire experts or pay for preparation of the lawsuit.
