Glossary
Pre-Settlement Funding Glossary
Plain-English definitions of the terms you'll encounter when researching pre-settlement funding, personal injury law, and what happens to your money at settlement.
Funding Terms
Pre-Settlement Funding and Cash Advances
Pre-Settlement Funding
A cash advance given to a plaintiff who has an active personal injury or civil lawsuit pending. The advance is repaid from the settlement or verdict proceeds if the case resolves in the plaintiff's favor. If the case is lost or dismissed, no repayment is owed — making it non-recourse by structure. See: What Is a Lawsuit Cash Advance?
Lawsuit Cash Advance
Another term for pre-settlement funding. It refers to money a plaintiff receives before the case settles, secured against the expected future recovery. Because repayment depends entirely on winning or settling, it is not a loan — there is no obligation to repay if there is no recovery. See: Lawsuit Loans vs. Lawsuit Cash Advance.
Non-Recourse
Non-recourse means the funding company's only recourse for repayment is the case settlement or verdict proceeds. If the case is lost, dismissed, or settles for less than the outstanding advance balance, the plaintiff owes nothing from personal assets, wages, or savings. The funding company absorbs the loss. See: What Is a Non-Recourse Lawsuit Advance?
Legal Terms
Plaintiff, Defendant, and Court Basics
Plaintiff
The person or party who files a lawsuit — the one making the legal claim for damages. In a personal injury case, the injured person is the plaintiff. Pre-settlement funding is available to plaintiffs, not defendants.
Defendant
The person, company, or other entity being sued — the party the plaintiff claims caused the harm or breach of duty. In a car accident personal injury case, the at-fault driver (and often their insurer) is the defendant.
Statute of Limitations
The legal deadline by which a lawsuit must be filed. In personal injury cases, this varies by state — typically one to three years from the date of injury, though exceptions exist. Missing the statute of limitations generally bars the claim permanently. Pre-settlement funding requires an active lawsuit, meaning the filing deadline must already have been met.
Settlement vs. Verdict
A settlement is a voluntary agreement between the plaintiff and defendant to resolve the case for an agreed sum, without going to trial. A verdict is the outcome of a trial decided by a judge or jury. Most personal injury cases resolve by settlement. Pre-settlement funding can be repaid from either a settlement or a favorable verdict.
Contingency Fee
An attorney's fee arrangement where the attorney is paid a percentage of the recovery only if the case is won or settled. If the case is lost, the attorney collects no fee. Standard contingency fees in personal injury cases typically range from 25% to 40% of the gross recovery, depending on the complexity and stage of the case. See: How Pre-Settlement Funding Affects Your Settlement Check.
Medical & Financial Terms
Liens, LOPs, and Settlement Structures
Medical Lien
A legal claim placed on a plaintiff's future settlement proceeds by a healthcare provider, insurer, or government program (such as Medicare or Medicaid) that paid for the plaintiff's medical treatment. When the case settles, the lienholder must typically be paid from the settlement before the plaintiff receives the remainder. See: Liens and Net Recovery: What Attorneys Need to Know.
Letter of Protection (LOP)
A written agreement between a plaintiff's attorney and a medical provider, promising that the provider's bill will be paid from the case settlement proceeds. It allows the plaintiff to receive medical treatment without paying upfront. Unlike pre-settlement funding, an LOP does not give the plaintiff cash — and if the case is lost, the medical bill is typically still owed personally. See: What Is a Letter of Protection (LOP)?
Subrogation
The right of an insurer (or other entity that paid benefits on the plaintiff's behalf) to recover its costs from the at-fault party's settlement proceeds. For example, if a health insurer paid a plaintiff's hospital bills and the plaintiff later wins a settlement, the insurer may have a subrogation claim against a portion of that recovery. Subrogation claims are addressed at settlement alongside other deductions.
Structured Settlement
A financial arrangement where a plaintiff agrees to receive personal injury compensation as periodic payments over time rather than as a single lump sum. Structured settlements are funded by the defendant or their insurer purchasing an annuity. They are not the same as pre-settlement funding — structured settlements happen after the case resolves, while pre-settlement funding provides cash while the case is still pending. See: Pre-Settlement Funding vs. Structured Settlement.
Related Pages
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FAQ
Frequently Asked Questions
What is pre-settlement funding?
Pre-settlement funding is a cash advance given to a plaintiff who has an active personal injury or civil lawsuit pending. The advance is repaid from the settlement or verdict proceeds if the case resolves in the plaintiff's favor. If the case is lost or dismissed, no repayment is owed — making it non-recourse by structure.
What is a lawsuit cash advance?
A lawsuit cash advance is another term for pre-settlement funding. It refers to money a plaintiff receives before the case settles, secured against the expected future recovery. Because repayment depends entirely on winning or settling, it is not a loan — there is no obligation to repay if there is no recovery.
What does non-recourse mean in pre-settlement funding?
Non-recourse means the funding company's only recourse for repayment is the case settlement or verdict proceeds. If the case is lost, dismissed, or settles for less than the outstanding advance balance, the plaintiff owes nothing from personal assets, wages, or savings. The funding company absorbs the loss.
What is a plaintiff?
A plaintiff is the person or party who files a lawsuit — the one making the legal claim for damages. In a personal injury case, the injured person is the plaintiff. Pre-settlement funding is available to plaintiffs, not defendants.
What is a defendant?
A defendant is the person, company, or other entity being sued — the party the plaintiff claims caused the harm or breach of duty. In a car accident personal injury case, the at-fault driver (and often their insurer) is the defendant.
What is a medical lien in a personal injury case?
A medical lien is a legal claim placed on a plaintiff's future settlement proceeds by a healthcare provider, insurer, or government program (such as Medicare or Medicaid) that paid for the plaintiff's medical treatment. When the case settles, the lienholder must typically be paid from the settlement before the plaintiff receives the remainder.
What is a Letter of Protection (LOP)?
A Letter of Protection (LOP) is a written agreement between a plaintiff's attorney and a medical provider, promising that the provider's bill will be paid from the case settlement proceeds. It allows the plaintiff to receive medical treatment now without paying upfront. Unlike pre-settlement funding, an LOP does not give the plaintiff cash — and if the case is lost, the medical bill is typically still owed personally.
What is a contingency fee?
A contingency fee is an attorney's fee arrangement where the attorney is paid a percentage of the recovery only if the case is won or settled. If the case is lost, the attorney collects no fee. Standard contingency fees in personal injury cases typically range from 25% to 40% of the gross recovery, depending on the complexity and stage of litigation.
What is a structured settlement?
A structured settlement is a financial arrangement where a plaintiff agrees to receive their personal injury compensation as periodic payments over time rather than as a single lump sum. Structured settlements are funded by the defendant or their insurer purchasing an annuity. They are not the same as pre-settlement funding — structured settlements happen after the case resolves, while pre-settlement funding provides cash while the case is still pending.
What is subrogation in a personal injury case?
Subrogation is the right of an insurer (or other entity that paid benefits on the plaintiff's behalf) to recover its costs from the at-fault party's settlement proceeds. For example, if a health insurer paid a plaintiff's hospital bills and the plaintiff later wins a settlement, the insurer may have a subrogation claim against a portion of that recovery.
What is a statute of limitations?
A statute of limitations is the legal deadline by which a lawsuit must be filed. In personal injury cases, the deadline varies by state — typically one to three years from the date of injury, though some states allow more or less time. Missing the statute of limitations generally bars the claim permanently.
What is the difference between a settlement and a verdict?
A settlement is a voluntary agreement between the plaintiff and defendant to resolve the case for an agreed sum, without going to trial. A verdict is the outcome of a trial decided by a judge or jury. Most personal injury cases resolve by settlement before trial. Pre-settlement funding can be repaid from either a settlement or a favorable verdict.
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