Don’t Let a Lawsuit Loan Throw You Into Bankruptcy

One of the most common reasons people file bankruptcy in Las Vegas is that they’ve been injured and can no longer work. Typically, insurance protects people, and lawsuits are usually allowed for those who were injured deliberately or negligently by someone else. The problem is that not everyone is insured (though “Obamacare” should ease the uninsured rate), and lawsuits can take so long that plaintiffs can’t pay their regular expenses from disability payments. One thing to beware of is taking out a lawsuit loan, as the lesson of one recent New York plaintiff found out.

Elwin Francis suffered an injury and hired a law firm to represent him. In the meantime, he took out a very large lawsuit loan. Eventually, Francis’ lawyers settled his case for $150,000, which netted him $100,000. Between the remaining fees and the lien on the lawsuit loan, Francis obtained a scant $111, according to Bloomberg. He promptly sued his lawyers for professional malpractice, alleging that they had a duty to warn him that his net recovery would be so small. The trial court sided with his lawyers because they were not involved in the lawsuit loan.

Unfortunately, it’s circumstances like these that can throw people into bankruptcy. If he cannot work and if he has high debts, he won’t have any other realistic choice. The best way to resolve this kind of situation is to not take out lawsuit loans in the first place. They often have high interest rates, and plaintiffs are better off taking a second mortgage on their homes than using a lawsuit loan. Beyond that, Francis might have had a chance of keeping more of his settlement if he’d filed Chapter 7 bankruptcy before his case settled. Lawsuit loans are dischargeable, but the incomes from them count towards the means test. Thus, there is a narrow window between when the money is gone and the lawsuit settles. This isn’t a recommendation of maliciously discharging debt when it can’t be paid, but bankruptcy is a worthwhile option for people in Elwin Francis’ situation before his settlement.

For more questions about bankruptcy in Las Vegas, please feel free to contact an experienced Freedom Law Firm Las Vegas bankruptcy attorney for a free initial consultation. Call us at 1-702-803-9251 to set up your free consultation.