Loans To Personal Injury Clients
Most personal injury cases take somewhere between two to four years to get to the trial stage. During the pendency of the case, some clients become desperate and ask, “Can you advance me some money?” As much as I’d like to help, the New York Rules of Professional Conduct prohibits attorneys from making loans to their clients.
As a result, many companies have popped up over the last ten to fifteen years that specialize in such presettlement loans. Perhaps you have seen their commercials on TV. Unfortunately, in my humble opinion, these companies prey upon the desperation of others by offering a short term fix at a very high cost. Since this type of “funding” is not considered a “loan” in the traditional sense, these companies charge outrageous interest that compounds over time. In other words, they often lend someone $10,000 during the early stages of the case and end up getting back twice that amount when the case ends a year or two later.
These companies will speak to your attorney to get the details of your case and examine key documents (e.g., the Police Accident Report, the Ambulance Call Report, the Operative Report, the Bill of Particulars, etc.). Thereafter, they make a decision as to whether to offer you a loan based on the probability of a successful outcome i.e., either a victory at trial or a settlement. If they decide to offer money, the attorney must sign the papers acknowledging the loan and consenting to payoff the lending company out of the client’s share of the verdict and/or settlement proceeds.
Do yourself a favor, if you have a pending case and find yourself in need of money, ask a friend or family member for help. This way you will avoid losing a (large?) chunk of the compensation that was earmarked for your pocket.
If you’d like to discuss this topic, or any other personal injury query, feel free to contact me, Michael Dreishpoon, Esq. (718-793-5555), at any time of the day.