I have been approached to invest money with a company that loans money to plaintiffs in personal injury lawsuits. If you are familiar with this type of investment, is it a legitimate business and what sort of annual returns should I expect?
2006-09-01 11:38:44 · 4 answers · asked by JAL86 1 in Business & Finance ➔ Investing
This company doesn't invest in settled lawsuits. It loans money to plaintiffs to pay their bills during litigation.
2006-09-01 17:33:45 · update #1
It is illegal for lawyers to do this, so outside companies have begun lending money based on the potential outcomes. They actually talk to the plaintiffs and, importantly, the plaintiff attorney to get expected outcomes. It is regarded as a slightly shady business in the legal community. Moreover, there are post-trial motions, appeals, lack of money to pay-out.
There is a ton of money to be made in this business because often the plaintiffs will "take what they can get" from these funding companies because a.) they want their money now and b.) they are often unsure if they'll ever get anything.
That said, legality and the complexity of the business make it a difficult proposition and a risky investment. If legality could be clear cut, this investment would come down to management team. The right managers could do well in this business
2006-09-05 08:32:55 · answer #1 · answered by Byron W 3 · 0⤊ 1⤋
I have heard of companies that 'buy' settlements. They work something like this.
1. The case is settled and the plaintiff is awarded a $X per month for 20 years.
2. The company pays $Y to the plaintiff in exchange for the right to collect these payments.
3. Profit is made by paying less than the total amount of the payments.
Since the payments have already been ordered by a court, the risk is low. In general it is a legitimate business. I can't comment on any particular company. As far as the returns, they should be similar to low risk loans.
2006-09-01 21:12:39 · answer #2 · answered by STEVEN F 7 · 0⤊ 0⤋
Lawsuit funding is as risky as the money managers' skill set. The business itself is over 15 years old and there are returns to be made. I wouldn't quit your day job though because like any investment, there are risks. Maybe you could invest in a few small claims and see if it is for you.
2013-09-30 11:11:28 · answer #3 · answered by jnhmkt 1 · 0⤊ 0⤋
I've never heard of it, but it sure smells fishy.
2006-09-01 20:19:35 · answer #4 · answered by Anonymous · 0⤊ 0⤋