In the world of post-settlement funding (sometimes referred to as “settlement advances” or “post-settlement cash flow funding”), attorneys and law firms often turn to third-party funders to bridge the gap between case resolution and cash in hand. A common question is: are there restrictions on how attorneys or clients can use the funded proceeds? The short answer is yes, but those restrictions are typically quite reasonable and tailored to protect everyone’s interests.
What Balanced Bridge Funding does, and does not, fund
First, it’s essential to clarify who Balanced Bridge Funding works with and their scope. Balanced Bridge Funding works with attorneys and law firms, providing capital to attorneys (or firms) based on expected plaintiff settlement.
Because Balanced Bridge is dealing with the law firm or attorney as the contracting party, the use of funds is subject to the agreement between the funder and the attorney, rather than by direct enforcement against the plaintiff. Nevertheless, within that agreement, certain stipulations ensure the funding operates fairly, transparently, and in compliance with applicable ethical and legal constraints.
Typical restrictions on fund usage
While the specific terms will vary from deal to deal, here are some common restrictions you’ll encounter in attorney-to-funder agreements:
- Restricted to case-related or business uses
Most funders require that the advanced funds be used for the attorney’s litigation business or case support: e.g. expert fees, case expenses, trial preparation, or operational costs. They are less likely to allow the funds to be used for unrelated personal or non-law-practice ventures. - No diversion to non-permissible activities
Agreements typically bar usage for anything that could jeopardize the enforceability of the transaction—redirecting funds in ways that interfere with the funder’s ability to recover its share upon settlement. - Prohibition on pledging or assignment without notice
Attorneys often cannot reassign or pledge the funded interest to another party without notifying or obtaining consent from the funder. This protects the funder’s security and ensures transparency in collateral rights. - Compliance with ethical and professional obligations
In many agreements, the use of funds must comply with applicable rules of professional conduct, local bar rules, and prohibitions against champerty or maintenance (depending on jurisdiction). The funder will often require that advances do not violate ethical constraints or client protection rules. - Reporting, accounting, and escrow requirements
Some agreements may require attorneys to maintain accounting records or deposit net settlement proceeds into an agreed escrow or trust account so that the funder can be paid directly from settlement. This ensures the funder’s return is protected and that funds are not misused post-settlement.
Why these restrictions matter
These limitations aren’t arbitrary; they help strike a balance:
- They protect the funder’s investment, ensuring there’s a clear path to repayment.
- They preserve the attorney’s fiduciary obligations to the client by requiring transparency and accountability.
- They avoid conflicts with ethical rules and jurisdictional limitations.
For law firms and attorneys, understanding and negotiating these restrictions is key to ensuring you receive funding under terms you can live with.
Contact Our Knowledgeable Team Today
Yes, there are legitimate and common restrictions on how attorneys or law firms can use post-settlement funding. But those restrictions are generally reasonable and designed to protect all parties, especially when your client’s claim and your firm’s cash flow are on the line. Balanced Bridge Funding tailors its arrangements to attorneys and firms, specifically focusing on post-settlement funding.
If you’d like to explore whether a funding arrangement would work for your firm or a particular case, reach out to Balanced Bridge Funding today. We’re happy to walk you through eligibility, terms, and how use-restrictions would be structured—so you can decide whether post-settlement capital makes sense for your practice.
For more information about Balanced Bridge Funding’s post settlement funding for attorneys and law firms, please call 267-457-4540 or email info@balancedbridge.com or click to fill out our simple and fast application.
