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Should I Take A Loan On My Personal Injury Case?

Many victims of personal injury are in need of monies to help run their lives while they miss work, and their medical bills start piling up.  While an experienced and effective personal injury attorney will get them the best settlement or judgment that takes time.  Even the best cases, with what seems like sure victory, it can take years.

What can you do in the mean time?  One answer is to take loans from third parties who specialize in financing lawsuits.  This can be legal. However, there are many pitfalls as well.

First, there is the problem of finding a reputable lending company.  Some lawyers can help.  But many clients get attracted to the quickness of the promise and then get sucked into very bad deals without consulting their lawyers:  loans where the interest rate is high, for example.  Some clients just don’t understand that he or she will have to pay it all back from an unknown settlement amount.

Injury Loans Can Create a Conflict of Interest

Sometimes these loans create a conflict of interest between the attorney and the client.  For example, if the client has pulled most of the value out of a case through a third party loan, he or she has a disincentive to settle the case for a reasonable value; the goal may then switch to “let’s take a chance” and go to trial.  When the personal injury attorney recommends settlement, there is no incentive for the client to be reasonable; she or he can simply spin the preverbal dice and risk losing because there is no downside to losing.  The only upside is if you win big.

Why is there a conflict of interest?  The attorney does not want to try the case if there is a reasonable settlement offer on the table because the climate for personal injury jury awards is not what it used to be.  Unfortunately, it’s bad.  But the client may have little incentive to take what’s on the table since he or she has been almost fully paid.

Legal Malpractice and Personal Injury Loans

In a case decided last money, a client filed a legal malpractice claim against his lawyers for failing to warn him of the details of the loan.  In that case, the client sued after finding out that he would receive nothing from the recovery because the lending company would get it all. The court, in New York Francis v. Mirman, Markovits & Landau PC, N.Y. Sup. Ct. Kings County, No. 29993/10, 1/3/13, found that the attorneys were not responsible for misleading the client because they did not recommend that the client take out loan not did they represent the client in securing the loan.  Thus, the court found that they did not “play any role” in securing the loan for the client.

Yet, no one ended up happy.  Two thirds of the settlement went to pay the loans; one third to pay the lawyers.  The client got $111 out of a $150,000 settlement.  On the other hand, the client got monies two times; the second time after the client knew what the settlement would be, he took out a second loan.  The lawyers were successful in reducing one loan, but not the other.  The client alleged that the law firm should have done more to reduce that lien on his case.  However, the law firm’s response was that they had no way of reducing that lien.

And the court found that the loans were in fact clearly “fair” in that the client requested them, the client signed the loan documents on every page, and he got the money.  Again, the second loan being after he knew what his settlement would be.

Massachusetts Personal Injury Loans That Make Sense

Sometimes, however, a case is just too expensive to litigate and the attorney recommends that a loan be taken out.  Usually this is for expenses to litigate the case.  In a motor vehicle collision case with grave injuries, the following experts may be needed:  an accident reconstructionist to testify as to how the accident happened, a graphic designer to produce a video of the accident, based on photos and testimony, and a medical doctor who can testify as to the extent of the victim’s personal injuries.  Medical malpractice cases also involve expensive experts

In such a case personal injury trial attorneys often recommend a loan.  This loan, however, is carefully considered by the attorney, in conjunction with the client.  Perhaps there would be some monies for the client, and some to pay for the litigation.  However, those monies would be balanced with the goal of getting the best settlement or judgment.  The key, it seems, is working with your personal injury attorney to achieve the correct balance.  It is rarely recommended except in cases with clear liability, serious and permanent injuries and sufficient insurance.

For information on how and when to use a loan from a third party in a serious personal injury case, call Attorney Neil Burns at 617-227-7423.