6 Common Reasons Why Pre-Settlement Funding Applications Get Denied

Facing financial challenges during a lawsuit can be overwhelming, and pre-settlement funding offers a lifeline for many individuals.

However, being denied funding can add stress to an already difficult situation. Unlike traditional financial products like car loans, where your credit score or employment status plays a critical role, pre-settlement funding decisions are based on different factors. Here are six of the most common reasons why your application for pre-settlement funding might be denied.

1. You Don’t Have an Attorney or There Are Issues with Your Attorney

One of the primary prerequisites for pre-settlement funding is that you are represented by an attorney. Without an attorney, your chances of securing a favorable legal outcome diminish significantly, which in turn makes it unlikely for a funding company to approve your application.

An attorney plays a crucial role in providing the required documentation to the funding company. If your attorney fails to submit the necessary documents or declines to sign the agreement acknowledging the repayment terms, your application could be rejected. The funding company relies on your attorney to ensure they will be reimbursed once your case settles. Thus, any issues with your attorney’s cooperation can negatively impact your chances of approval.

2. You’ve Reached the Limit of Available Funding

When you apply for pre-settlement funding, the company will investigate whether you have already secured funding against your case. They do this to ensure the total borrowed amount does not exceed a safe percentage of your expected settlement or award.

If the funding company determines that your case has already been leveraged to its maximum allowable limit, they may deny your application. It's essential to disclose any prior funding during your application, as these details will emerge during the company’s due diligence process.

3. Pre-Settlement Funding Isn’t Available in Your State

Pre-settlement funding regulations differ from state to state. Some states have strict rules governing litigation funding, while others may outright prohibit these services. As a result, not all funding companies operate nationwide.

Before applying, it’s important to confirm whether the funding company offers services in your state. If you live in a state where the company does not operate, your application will likely be denied, regardless of the strength of your case.

4. You Have Financial Liabilities That Don’t Meet Guidelines

Although pre-settlement funding companies don’t consider credit scores in their decision-making process, certain financial obligations can still lead to a denial. Liabilities such as outstanding child support liens or unresolved bankruptcies can be red flags for funding companies.

These liabilities may affect the funding company’s ability to recover their investment once your case settles. The good news is that once you resolve these issues, you can often reapply for funding.

5. Your Case Is Too New

Timing is crucial when applying for pre-settlement funding. If your case is still in its early stages, there may not be enough documentation available for the funding company to make an informed decision. For example, essential documents like police reports, medical records, or insurance reports may not have been completed yet.

Funding companies need a clear picture of your case to assess its merits and determine whether they are willing to take the risk of providing you with an advance. Applying too soon after the incident may lead to a denial simply because not enough evidence is available to support your claim.

6. Liability Issues

Even if you feel confident about your case, the funding company will conduct its own assessment of the facts. One of the most important factors they will consider is liability. If it’s unclear who is at fault, or if there is a chance you might be partially or fully responsible, the company may deny your application.

Funding companies need to minimize their risks, and cases with uncertain liability present a higher risk of a reduced or unsuccessful settlement. For this reason, they will carefully review all documentation and seek clarity on the facts before approving your request.

What Can You Do If Your Application Is Denied?

If your pre-settlement funding application is denied, it doesn’t mean you’re out of options. Consider the following steps:

• Review the Denial Reasons: Speak with your attorney to understand why your application was denied. This can help you address specific issues and potentially improve your chances in the future.
• Resolve Financial Liabilities: If your denial was due to liens or bankruptcies, work on resolving those obligations and reapply once they’re cleared.
• Gather More Documentation: If your case is too new, wait until more evidence is available before reapplying.
• Explore Other Funding Companies: Some companies may have different eligibility criteria or operate in states where others don’t.

Need Financial Relief While You Wait for Your Settlement?

Don’t let financial stress take a toll on your life while your case is pending. Pre-settlement funding can provide you with the cash you need to cover expenses like medical bills, rent, and daily living costs. Apply today to see if you qualify. Call 888-474-8473 or apply now.