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The same scary scenario is too common among people who are in the middle of a lawsuit: there’s talk about a settlement, but it’s a long way off. The breadwinner (or one of them) in the house is catastrophically injured and likely out of work, which means that a much-needed paycheck isn’t coming in. Settlement should make the financial strain go away, but the money isn’t here right now. Savings are drained, and the family has exhausted their options to pay the bills and put food on the table. Now what?

While the plaintiff’s attorney might like to step in and help, the American Bar Association prohibits lawyers from lending money to clients for their basic needs. With nowhere else to go, many families in this situation turn to third-party litigation funding companies. There are two ways these companies offer cash advances: through “recourse” funding or “nonrecourse” funding. The difference between the two ways is whether the third-party company can collect the money it funded if the plaintiff loses his or her lawsuit.

When a person receives a recourse advance during litigation and loses his or her lawsuit, the litigation funding company can still collect. Even if the person cannot pay back the debt out-of-pocket, the company may seize property, garnish wages, and file other actions to collect the money.

That’s why non-recourse advances are generally more attractive to those who need an advance during litigation. Plaintiffs are not on the hook for the money owed if they lose their lawsuit. In those scenarios, the third-party company just loses what it agreed to fund.

Here’s the catch.

Non-recourse funding companies often charge astronomical interest rates. A funding agreement can ultimately cost a plaintiff 50%, 100%, or more of the amount they borrowed. The company validates their crazy interest rates because they take the risk of losing money if the plaintiff doesn’t get a settlement.

While non-recourse funding companies have been the subject of many lawsuits and inquiries, little has been done yet to change the industry.

We are promoting the change that is needed. The Bairs Foundation is a 501(c)(3) nonprofit organization that provides the financial assistance families need during litigation. We advance at the rate of 7% simple interest — a big difference from the compound interest rates seen across much of the industry. That little bit of interest then goes back into the foundation to help another family in need. We’re hoping other nonprofits will replicate our fair and sustainable model, so plaintiffs have fair options when they’re in financial need during litigation.

If you or someone you know is struggling financially during litigation, visit to learn more about our foundation and apply for help.

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