Can I Get A “Settlement Advance” in a Missouri Personal Injury Case?

About the Author

Ethan Charles (“EC”) Duckworth is the founding attorney of Duckworth Injury Law. EC earned his law degree from the University of Missouri - Columbia, where he graduated in the top 10 of his class and served as an Editor of the Missouri Law Review. EC currently serves as a member of the Missouri Association of Trial Attorneys (MATA) and is a graduate of the Ross T. Roberts Trial Academy. EC has represented hundreds of injury victims throughout his career, resulting in tens of millions of dollars in compensation recovered. 

Understanding Settlement Advances & How Obtaining One May Impact Your Personal Injury Case in Missouri

Once a personal injury lawsuit is filed in court, the case will often take between six months to two years for resolution. During this time, personal injury victims often experience a loss (or reduction) of income and mounting medical bills. Unfortunately, life doesn’t stop for injury victims while their case is pending, and financial stressors, from mortgage, rent, car, and utility expenses, can cause significant financial hardship. As such, our firm often receives requests from personal injury clients requesting a “settlement advance” to cover expenses while their case is pending.   

So, are settlement advances available in Missouri personal injury cases? Typically, yes – settlement advances are available to clients while their personal injury case is pending in Missouri. However, whether or not it’s a good idea for a client to accept a settlement advance is a different story. Settlement advances are offered by third-party loan companies, carry very high interest rates, and can influence your ultimate settlement and recovery. Whether or not it makes sense for you to accept a settlement advance depends on a variety of factors unique to your specific personal injury case. 

What is a Settlement Advance in a Missouri Personal Injury Case?

A settlement advance is a common term for a loan provided to a personal injury claimant while their personal injury case is pending. These loans are typically provided by third-party lenders who specialize in offering these types of litigation loans. These loans are used to provide personal injury claimants with money to cover expenses while they wait for their case to settle or proceed to trial.

While settlement advances are legal in Missouri, your attorney is not allowed to provide you a settlement advance and/or loan themselves. Missouri’s Rules of Professional Conduct (Rule 4-1.8(e)) states that “A lawyer shall not provide financial assistance to a client in connection with pending or contemplated litigation….” Rather, the settlement advance and/or loan must come from a third-party lender. 

Is It a Good Idea to Accept a Settlement Advance for My Personal Injury Case?

While every client’s financial situation is unique, we generally advise clients to avoid accepting a settlement advance if at all possible. While we understand that sometimes there is no other option to cover necessary living expenses, these settlement advances carry significant interest rates and can put pressure on you to resolve your case in a hurry.

Settlement advances usually have interest rates that compound monthly, leading to annual interest rates that can exceed 50%. During the course of a two-year personal injury claim, you could end up having to pay back your original settlement advance several times over. 

In addition to the high interest rates, settlement advances put pressure on you to resolve your case faster, often resulting in a lower settlement amount. If defense counsel or the at-fault party’s insurance company learns of your settlement advance, they may try to present a low-ball offer, knowing that you will not want to incur further interest on your loan by prolonging litigation. In other words, a settlement advance encourages you to resolve your personal injury case as quickly as possible to avoid compounding interest accruing on your settlement advance.

Example:

• You take a settlement loan for $2,000
• The loan has a 3% interest rate that compounds monthly
• You pay off your loan after your case is settled 18 months later
• TOTAL AMOUNT REPAID: $3,466
  

What Alternatives Do I Have to Taking a Settlement Advance?

As settlement advances have significant downsides, if there are any other available options to avoid taking a settlement advance, we advise clients to pursue those options first. These can include the following options:

• Setting up payment plans or hardship plans with creditors
• Having your attorney set up medical liens with providers in lieu of them billing you directly
• Applying for government assistance such as Medicaid, SSI, short-term disability, etc.
• Home equity line of credit
• Borrowing money from close family members or friends
• Setting up a crowdfunding platform such as GoFundMe
• Community assistance programs

What Happens if I Accept a Settlement Advance and Later Lose My Personal Injury Case?

One of the few advantages of a settlement advance is that they are typically a non-recourse loan, meaning that if you lose your personal injury case, you do not have to pay back the loan to the lender. This allows a plaintiff to accept the loan “risk free”, as a plaintiff only pays the loan back from the settlement proceeds of the case. 

How Much Money Can I Get in a Personal Injury Settlement Advance?

The amount of money you will be eligible to receive in a personal injury settlement advance directly correlates with the anticipated value of your future settlement or judgment. Simply put, a lender will only loan you an amount they are comfortable believing they will be repaid from your settlement proceeds. 

As a portion of your settlement will go to attorney’s fees, case expenses, and medical bills/liens, your settlement advance will usually not exceed 10 to 20% of your expected settlement (however, the final payoff amount after interest may be higher). 

In cases where liability is contested and your odds of winning your case are lower, a settlement advance lender will offer a lesser amount. 

The following factors are used by lenders to determine your settlement advance amount:

• Strength of liability
• Insurance policy limits
• Anticipated case settlement
• Medical treatment and medical bills
• Attorney reputation 

Duckworth Injury Law Provides Guidance Throughout Your Personal Injury Case. Call Today to Build Your Case & Learn About Your Financial Options Before Settlement or Trial

Whether your personal injury case involves a car accident, truck accident, motorcycle accident, or boating accident, Duckworth Injury Law will provide you with a clear explanation of your case value, including your options for a settlement advance if necessary. 

Duckworth Injury Law takes pride as being mid-Missouri’s hometown law firm and strives to be the best personal injury firm in Columbia, Jefferson City, the Lake of the Ozarks, or anywhere else across mid-Missouri.

If you’d like to discuss what options are available to you in your personal injury claim, reach out to Duckworth Injury Law today for a free case evaluation and consultation.