For Attorneys

Liens, Net Recovery, and Funding: What Attorneys Should Know

When a client asks about pre-settlement funding, the question that actually drives underwriting isn't the gross settlement demand — it's net recovery: what's left after attorney fees, litigation costs, and liens. Understanding how funders run that math makes it easier to set realistic expectations with clients and to manage funding requests across the life of a case.

This is a practical look at how that calculation works and where it can get complicated.

Contact Our Team

Why It Matters

Why Funders Underwrite Against Net Recovery, Not Gross

Attorney fees and litigation costs come off the gross settlement first under nearly every fee agreement, before liens or a client's own share are calculated.

Medical liens, Medicare/Medicaid liens, and Letters of Protection are typically resolved from what remains after fees and costs — and can be substantial in cases with extensive treatment.

A funding payoff sits in that same line of obligations, which is why an advance is sized against what's realistically left, not the headline settlement number.

Cases that look large on paper can have surprisingly little net recovery once fees, costs, and liens are factored in — and underwriting reflects that.

Details

The Disbursement Order in Practice

At settlement, funds are typically deposited into your trust account, with attorney fees and case costs deducted first per the fee agreement. Liens are resolved next — often after negotiation, since medical providers, Medicare, and Medicaid frequently accept reduced amounts. Any pre-settlement funding payoff follows, based on the funder's written payoff statement, with the remaining balance disbursed to the client.

Because lien negotiation can shift the final numbers meaningfully, keeping a funder updated on lien developments — particularly if they turn out larger than initially estimated — helps avoid disbursement surprises for everyone, including the client.

Details

Managing Funding Requests Over the Life of a Case

If a client requests a second advance later in the case, underwriting starts from the current expected net recovery minus the first advance's full payoff, fees, costs, and known liens.

Compounding fee structures on an existing advance shrink the remaining equity the longer a case stays open — worth factoring into case timeline conversations with clients.

Sharing updated case status — new liability evidence, treatment milestones, lien resolutions — when it's available helps a funder evaluate additional requests more accurately and quickly.

Q&A

Frequently Asked Questions

How do funders size an advance against a case's value?

Funders underwrite against the case's expected net recovery — the amount likely to remain after attorney fees, litigation costs, and known liens — not the gross settlement demand. This is why an accurate, current view of liens matters during underwriting.

What's the typical disbursement order at settlement?

Generally, attorney fees and case costs are deducted from the gross settlement first, then liens are resolved, then any funding payoff is paid, and the remainder goes to the client. The precise order and treatment of statutory liens can vary by state and lien type.

What happens if liens turn out to be larger than expected at the time of underwriting?

Larger-than-expected liens reduce the net recovery available to satisfy both the client and any funding payoff. This is a key reason underwriting is conservative on advance amounts, and why keeping the funder updated on lien developments matters.

Can a client request additional funding later in the same case?

Sometimes, if sufficient case equity remains after the first advance's payoff, fees, costs, and liens are accounted for. Any compounding fee on the existing advance reduces what's available for additional funding the longer the case remains open.

How does Caseflow Capital coordinate with my office during underwriting?

We work directly with the attorney of record to confirm liability, case stage, and known liens, typically through a short call or document exchange. We don't pay referral fees and don't ask attorneys to recommend a specific funding amount to clients.