What is a Case Bond?
A case bond is a method for providing immediate funding for a litigant in a civil suit where a company buys the right to proceeds from the suit, offering money up front to help the litigant cover costs while moving through court. The litigant sells a bond to the purchaser, and the bond matures when the lawsuit ends. If the plaintiff wins the suit, he pays out on the bond, and if he does not, the company receives nothing. Numerous firms offer case bonds, and it is a good idea to review their terms carefully when selecting an appropriate company to work with.
People filing suits often run into financial problems. It can take a long time to move litigation through the court system, and the plaintiff may have immediate legal, medical, and living expenses. When people are suing a company with deep pockets, simply waiting the plaintiff out is a common tactic. People may use a variety of options to finance their suits, including taking out home equity lines of credit, borrowing, or arranging a case bond.
Before purchasing the bond, the company will review the case to determine if they want to take on the risk, and will offer a payout they think is appropriate. If the plaintiff wins, the company will expect that money back, along with a fee. People should read the offers carefully to find out more about the size of the fee, as it can be substantial in some cases. Companies offering case bonds need to be able to recover losses, as not every case ends with a win, and charging high fees can be a method of offsetting risk.
Essentially, the company is making an investment in the outcome of a lawsuit, and buying the right to the payout. The litigant will need to sign paperwork reassigning any damages to the case bond company in the event of a win, so the company can be assured that it will get its money in that case. People can use the money from the case bond however they want to, for everything from paying for necessary services to putting in a savings account to generate funds to live on later.
People considering a case bond should discuss it with an attorney. There may be important legal issues people should consider before signing the paperwork. In cases where an attorney is taking a case on a no win, no fee basis, she may have a prior claim to the proceeds of any settlement or damages.
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