Legal Funding versus Structured Settlement
April 23, 2010
At Oasis, we get hundreds of phone calls from people seeking financial help, but they are often confused as to what exactly they need; a legal funding or to sell a portion of their structured settlement. The good thing is that this is easy to clear up.
There is a big difference between a legal funding and a structured settlement. Simply put, a legal funding is something you can get BEFORE you receive your cash award after winning your lawsuit, while a structured settlement is how you receive your cash award AFTER you’ve won your case. O.k., o.k., there is more to it than that. Hopefully the following examples will clear it all up.
Legal Funding: suppose Jane, a beautician and a single Mom, was driving home when her car was hit by another car. In the accident, she broke her arm. Jane decided to hire an attorney to sue the other driver in order to get the money she needs to fix her car, pay her medical bills, and pay for her time off work – after all as a beautician she can’t work with a broken arm and can’t earn her paycheck. Unfortunately, the lawsuit is taking far longer than hoped and she’s used up almost all of her small savings. So she applies for and receives a legal funding. The legal funding allows her to pay her bills until her arm heals. In four more weeks she’s back to work and receiving a paycheck. Then, three months later her lawsuit settles and she receives a fair award. She pays her attorney, her medical bills, and the funding company. Case closed.
Structured Settlement: now John, an electrician working on the construction site of a new office building, is involved in a terrible accident in which his hand is crushed. After the emergency trip to the hospital and several surgeries, the doctors determine that he won’t regain full use of his hand. Without the full use of his hands he can’t be an electrician. Since John’s wife works, he’s not in need of financial help to pay his bills. However, because his workplace injury he has been left unable to continue in his career. He files a worker’s compensation suit, and wins a large amount of money, $360,000. However, instead of giving John the money all at once, it is agreed that he will be awarded a structured settlement; which pays John $3,000 a month for the next ten years. This is so John can maintain some income (since he can’t earn a paycheck as an electrician) while he learns new skills for a different line of work.
Again, a legal funding is something you can get before you receive your case award, while a structured settlement is the actual award.
