Advances in Non-Recourse Financing

Good morning and welcome to this week’s installment of our video blog. I’m Marcus Michles here at Michles & Booth again, and you can find this blog at\blog. I get that wrong every time, but you can find us there; find installments, get questions answered. You can send us an email, text message. Let us know what you want to talk about.

Today I’m going to talk about something that might come as a surprise to you, and to tell you the truth, most times when I explain something I have a pretty good understanding of why it works that way. I like to tell people that the law is really supposed to make sense. If it doesn’t make sense, it’s a bad law, but here are some rules and regulations that I’m not sure they make good sense, but they’re…they’re the rules no matter what, and that’s this.

Let’s say you’re hurt in a car accident, you hire a lawyer, and that lawyer is helping you get that car accident case, but you’ve got a progressive. You’ve got surgery and physical therapy. You’ve got things you’ve got to do, and it’s time consuming, but meanwhile you’re out of work. You’ve got no income. The world’s closing in on you. You’ve got bills. You’ve got problems, right?

I get calls very routinely…excuse me…and very fairly from clients asking for an advance or asking to borrow money from the lawyer, and this is where it gets tricky, because sometimes you’ve got to tell people not only can I not do it, but I’m ethically and legally prohibited as a lawyer from doing it.

Lawyers can not lend money.

Again I can’t explain why that is…I can tell you the Florida Bar, which regulates lawyers, has a lot of rules and one of those rules is that the lawyer can not pay any of the medical bills or costs as they come up, as they accrue. Now the Florida Bar wants to take the position that they don’t want lawyers buying their way into cases. I get that. You don’t want to have a big economically powerful law firm that’s like a bank, and the clients go there, because they’re a bank. I can kind of get that.

What I can’t understand is why I’ve got a client whose lights are getting turned off, her powers getting turned off, her house is being foreclosed on or their bills are being turned over to collections, and I know that they’re going to collect money down the road. Why shouldn’t I be able to advance those costs knowing that down the road those costs are going to be repaid? But I can’t, and if I do, I ethically violate my rules and can lose my license to practice law, which is the ability to feed my family. So I don’t fool around with those rules. There’s no gray area to them for me.

That leaves my clients often looking at me like “well, what good are you? If I starve to death waiting for the settlement to happen, what good is the claim?” What good is the case, and what good am I as their lawyer? Often times we’re permitted to advance costs of the litigation. I can pay a doctor, for example, to conference with me. I can pay the doctor, for example, an expert witness fee to evaluate or analyze parts of the case, but I can’t pay that doctor directly for the healthcare services that my client receives, and quite honestly, I think that’s wrong.

And one of the problems that it creates is this…there are lawyers; I don’t know who and I don’t care to name names, but there are lawyers out there that break this rule, and they fund their clients, and they…they do this kind of under the table. Well, the clients…they know about it. People on the street know about it, and it creates a little bit of a competitive disadvantage for the lawyers who are playing by the rules when they’re competing with the lawyers who aren’t quite playing by those same rules… particularly, and this is hard to say, particularly if they’re from out of state. They’re just an advertising law firm like a bank. They’re in Illinois or something, and they put up an eight hundred number and run a television commercial.

Then you’ve got a short-term fix, because you’ve got them willing to write checks for your health care providers, but you got some long-term problems, and one of those problems we touched on in last week’s video blog – letters of protection. Healthcare providers in our community know which lawyers are corrected on the up-and-up. They also know which lawyers are not, and they’ll sign letters of protection with law firms that are legitimate, forthright and have the talent to do right by them. And they won’t sign those letters of protection with the lawyers that aren’t playing by the rules, so you can create a lot of problems for yourself.

The Solution – Non-recourse Financing

Now there are some solutions. They’re not great solutions, but there are solutions. There are ways…there are companies out there. Some of them are called non-recourse financing companies. Some of them are called factoring companies, and they fund litigation. In other words, they lend money against the case. It’s not a great deal, but it’s a deal that can keep you afloat. So if you’re out there, and you’re represented by counsel, and you’ve got financial issues, ask them about non-recourse financing. Ask them about factoring companies to get bills paid, but keep in mind that your lawyer ethically can’t front you money unless, and there’s one exception to that.

We discussed this in our office yesterday with our paralegals. There is an exception. If an offer has been made in your case, and your case is pending resolution, then the lawyer is permitted to advance money from that offer. The difference, however, is if there’s no offer on the table and no guarantee that any money is coming in, your lawyer can’t pay for your medical bills up front and can’t ethically lend you money against your case.

So it’s kind of a convoluted area, a little bit tricky. Have a good conversation with your lawyer. There are solutions out there, and in the meantime, if you’ve got questions, give me a call. I’m Marcus here at Michles & Booth. Happy to answer those questions, and we’ll see you next week.


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