I am contacted almost weekly by clients who want to get an advance on their Utah personal injury case. It seems that with the souring economy, requests for these advances are increasing. While many attorneys grumble about having to help their client obtain an advance, I actually see it as something that will help me get a better result for my client.
The fact is, car accidents can cause significant financial hardship to those that are involved in them. Many times this comes from not being able to work like before. It can also come from accruing medical bills or not being able to work physically-intensive jobs like before. So when the normal financial stream is disrupted, it can cause a car accident victim serious financial difficulty. The financial pressures can get so bad that a client may actually tell her lawyer that she needs to settle her case now, even if she takes less money, because of the bills she has.
Settlement advances, sometimes referred to as lawsuit advances, can help in these situations. They help give the client more breathing room and can reduce the pressure on the attorney to settle the client’s case prematurely. Typically when cases are settled before their time, they will not be worth as much. The insurance adjuster will sense the desperation that a client may have and will not be as inclined to provide their top-dollar offer. The reality is that sometimes all a case needs to get at that top-dollar offer is a few more week’s of negotiation time. A cash advance that helps to relieve a client’s financial pressure, can be just the ticket needed to get a case resolved for a fair amount.
Settlement cash advances are not made by a client’s attorney. They are made by independent lenders who will advance money on the promise that they get the money back, plus interest, when the case is resolved. These advances are considered “non-recourse,” so if the case happens to be lost at trial, for example, that advance company will give up their claim to be paid back. Keep in mind, however, that the interest rates on these loans will not be low. Some cash advances charge interest rates upwards of 60-80 percent per year. However, when you consider that the extra breathing room can help an attorney get an additional thousand plus dollars, the interest payment suddenly seems to be a good value for the benefit obtained. Further, the interest rate is usually much less than that charged by one of those pay-day lender companies.
Lawsuit advances require that the person seeking to get an advance have an attorney. This is because the advance company requires that the attorney promise to pay them at the end of the borrower’s case. This gives them some leverage to get their money back. Theses companies also require that the prospective borrower have a “decent” case. If the case is speculative and uncertain, an advance company is much less likely to approve an advance. In terms of the amount that can be borrowed, I always tell my client to borrow as little as is necessary to get by. This is because the interest can eat up their settlement amount! Even without this self-restraint, however, most of these settlement advance companies will not advance more than 10-15 percent of the estimated value of the case, unless there are unique circumstances.
Ron Kramer is a Utah attorney who specializes in car accident-type cases and whose office regularly helps facilitate settlement cash advances for their clients for free. Along with the service guarantee that Mr. Kramer provides, he sees this as yet another value-added benefit he can provide his clients.
Published by: Ron Kramer