Texas Personal Injury Law Blog

Should I Get an Advance From a Personal Injury Loan Company?

There are several companies that offer to loan personal injury plaintiff’s money in exchange for a few ‘processing fees’ and interest on the loan.  The go by names like case advance companies, lawsuit loan companies, lawsuit cash advance companies, law suit lending companies and other similar names.  Some only offer to advance money towards a settlement or a structured settlement payout. In the end they are all very similar. They are personal injury loan sharks. We discourage clients from using a personal injury loan company as discussed below.

Personal Injury Loan Sharks

What most people do not realize is that these companies are the loan sharks of the personal injury world.  They prey on people when they are down, hurting, cannot work and cannot think straight.  They get you to agree to a small loan in exchange for outrageous interest rates compounded monthly instead of annually. Or, they may offer you pennies on the dollar now for a settlement that has a structured future payout.  By the time a personal injury plaintiff’s case settles, their $2,000.00 loan plus a $300.00 fee has quickly become a $7,000 debt.

How Personal Injury Loans Harm Your Case

The problem these lawsuit funding companies create for the personal injury attorney, is that he is faced with trying to make a settlement work when the plaintiff has already received his money.  Why would the plaintiff want to accept what would normally be a reasonable settlement offer when he is receiving nothing in his pocket at the end of the day?   The plaintiff now has no real risk because he can go to trial, gamble and if he loses, he discharges all debt to the lawsuit advance company in bankruptcy.  So why accept the reasonable settlement that simply pays off what he owes?

Attorney-Client Privilege May Be Compromised

Loan contract

In addition to the above problem, personal injury loan companies create a whole different problem.  They are not stupid.  They do not want to loan money on bad cases.  Thus, to extend the loan, they want the attorney to give them all the details of the case.  Some of this information may be privileged.  The kind of disclosures case loan companies seek could very well violate the attorney-client privilege.

The personal injury lawyer handling the case has to be very careful about what he discloses and what he refuses to disclose, even though the refusal may make the loan shark decline the loan.  Sometimes the best solution is for the lawyer to hand the file back to the client and part ways. Particularly when it appears that the client is going to insist on a course of conduct that could result in hindering the effective representation of the client.

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Author

Paul Cannon

Paul Cannon has practiced personal injury trial law since 1995. He is Board Certified in Personal Injury Trial Law (2005). He has earned recognition as a Super Lawyer by Thompson Reuters in 2017 & 2018, and as a Top 100 Trial Lawyer by the National Trial Lawyers Association in 2017. He is a Shareholder, trial lawyer and online marketing manager at Simmons and Fletcher, P.C. His legal writings have been published by the Texas Bar Journal, Business.com, Lawyer.com HG Legal Resources, Lawfirms.com, and others. He has been asked to give education talks and media interviews on dog bite law.