Top 8 Reasons for Declined Lawsuit Loans
One of our most common questions asked by our clients: Why was my application declined or what would cause my application to get declined.
Although we receive applications everyday from all over the nation, on average we only end up approving about 30% of those applications. The other 70% of applications get declined for various reasons.
The goal of this article is simply to inform consumers why lawsuit loan requests get declined.
In no particular order, below is a list of the Top 8 Reasons for Declined Lawsuit Loans:
- Client does not have an attorney
- Client has a case type we cannot fund
- Client has a fee agreement instead of a contingency agreement with their attorney
- No “Equity” in the case
- Attorney will not cooperate
- Bad contact info
- New case
- Missing key paperwork (documentation)
We’ll address each of these reasons below:
Reason # 1: Client does not have an attorney
This is always an immediate deal killer. As an investor in lawsuits, we insist our client’s cases are being represented by a professional attorney. This requirement provides us with reassurance that not only will your case be handled correctly according to legal procedure but also when a settlement is reached, the attorney as an independent third party, will make sure we get paid back. Without an attorney in the picture we have no assurance a client will pay us back.
Reason #2: Client has a case type we cannot fund
Sometimes we get applications that may be great lawsuits, but we simply cannot invest in them because the law prohibits it or we have no assurance of getting paid back. These types of cases include:
Cases where the client is a minor (includes many birth defect cases)
Small claims (no attorney)
Worker’s Comp. cases in certain states
Divorce cases (rarely we can do these)
Tenant – Landlord disputes
Social Security cases
Judgments against private individuals
Individual plaintiff cases in the state of Ohio
Reason #3: Client has a fee agreement instead of a contingency agreement with their attorney
We prefer to fund cases where the attorney is working on a contingency basis, i.e. the attorney only gets paid if they win your case. We prefer this scenario because we know your attorney has a vested interest in the successful outcome of your case. If your attorney is working on a fee-only basis, then they may not have the same incentive to successfully litigate your case, i.e. the attorney gets paid whether you win or lose.
Reason #4: No “Equity” in the case
In a lawsuit we define “equity” as the value of the lawsuit minus all the fees, expenses, and liens on the case. The maximum value of a lawsuit is set by a combination of what the law allows and often what insurance policy limits exist.
Liens of all kinds will eat into your case’s equity. Liens include: medical, welfare, child-support, taxes, lawsuit advances, etc. Attorney fees and expenses also will eat into your equity. Attorney fees typically run at 20% to 50% of what a case settles for.
Often clients will come to us requesting money, but because they have had a prior advance on their case, there is no more available equity in the case and we cannot approve them.
Bottom-line, your case must have some equity for us to approve your for funding.
Reason #5: Attorney will not cooperate
We often see very good lawsuits, where the client is in desperate need of money, but their attorney will not cooperate. Often attorneys will not cooperate with us because our fees are expensive and they feel they are looking out for their clients’ best interests by protecting them from working with us. And in some situations this is true.
However in most situations, attorneys are simply used to having money and cannot relate with their clients financial distress. It’s very common for our clients to be facing foreclosure or eviction due to a personal injury that has severely restricted their ability to earn an income. And because their lawsuit may take years to settle, these clients absolutely need our services, yet sometimes attorneys will not cooperate.
Reason #6: Bad contact info
Sometimes we receive applications where either the client contact information is wrong or the attorney information is wrong, i.e. bad addresses, social security numbers, phone numbers, etc. Obviously if we cannot communicate with the client or attorney we will not be able to approve them for an advance.
Reason #7: New case
Occasionally we have to decline a request simply because the case is too new. When a case is very new, there may no supporting case documentation for us to review and help make a decision whether or not the case is good. Often with personal injury cases, at least 1-month needs to transpire before it can be funded. This allows time to generate the necessary paperwork, such as a police/accident report, medical records, insurance coverage info, etc.
We can and often do work around this issue if your attorney feels very strongly that your case will be a good one.
Reason #8: Missing key paperwork (documentation)
Often we cannot fund a case because some key documentation that we need to make our decision simply does not exist. For example, in medical malpractice cases we need to see an expert report to assist our evaluation. If an expert report does not exist, we will not be able to fund the case. Or in the case of Zyprexa or Fen-Phen claims, if we cannot review the “Settlement” paperwork we will not be able to issue an approval. Sometimes there is no way around this issue and we have to decline a client’s request or wait until the missing paperwork becomes available.