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Lawsuit Loans and Other Common Liens

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In a lawsuit, there may be several types of liens, other than Lawsuit Loans, that must be paid when the case settles, prior to disbursing settlement funds to the plaintiff.

Attorney’s Fee – In cases where the attorney’s fee is only paid if the case is successful (otherwise known as contingency fees), the attorney’s fee is essentially a lien on the proceeds of the case. These terms are sometimes negotiated and memorialized in a retainer agreement signed by the attorney and the client. This agreement is most commonly seen in personal injury cases. The fee usually ranges from 20% to 40% of the total recovery. Of importance for purposes of Lawsuit Loans is that the attorney’s fee is superior a Lawsuit Loan.

Letters of Protection – Similar to the above, letters of protection are usually found in personal injury actions where there is extensive medical treatment. Basically, a letter of protection is a written acknowledgment, by an attorney, that his office will protect the medical provider’s lien for medical treatment rendered. It is unclear whether these acknowledgments take priority over lawsuit funding transactions, but nonetheless, Lawsuit Loan companies pay special attention to outstanding medical bills when underwriting a case.

Federal Tax Liens – By law, the presence of Federal Tax Liens take priority over other liens in the file including Lawsuit Loans. And this should come to no surprise to anyone since Uncle Sam wants his money first. These liens will typically attach to the proceeds and may have to be directly deposited with the IRS or other Federal Agency as full or partial payment of these obligations. In some instances, these amount can be negotiated down in an effort to settle a case.

Child Support – Most state laws require the presence of child support liens be superior to Lawsuit Loans. Child support liens are negotiable only in extremely rare cases. The presence of these and all other liens sometimes hinder settlement negotiations as the plaintiff suddenly realizes that he is pursuing his case to pay off his creditors. Under these circumstances, what is the plaintiff’s incentive to settle?

Lawsuit Loan companies know that verification of the existence of any of the above liens is crucial when considering whether an applicant is qualified for a Lawsuit Loan. These liens do not necessarily disqualify a person from obtaining a Lawsuit Loan but they will definitely reduce the amount of the Lawsuit Loan given.

Steven Medvin is the Executive Director of SMP Advance Funding, LLC, which provides lawsuit funding to individuals who need a lawsuit loan for pending lawsuits. For more information please visit: http://www.smpadvance.com.