Financing Your Legal Fees
It is true that most of the small as well as medium sized law firms are aiming to grow but only few of them have the capital needed to handle the increased case of loads or extended settlement payments. Factoring which is actually the sale and the purchase of accounts receivable where in this case is legal fees comes at a discounted or near the time of creation helps in solving this dilemma.
What happens here most of the time especially with specialty finance firms is buy the legal fees on settled cases. The moment when the case is settled and that all of the documents are executed by the defendant and the plaintiff, the receivable fee is bought for discounted price which range normally around 2 to 12 percent depending on the payor as well as the amount. The major difference in the rates is basically on the estimated time it is required to recollect the fee.
Here are few of the steps on how the entire process is done.
Number 1. Master fee purchase agreement – for this one, it’s actually done to be able to specify terms under which fees are bought and normally includes the fees, advance rates, rebates and minimum and maximum amounts.
Number 2. Submitting fee purchase – for this, it is where the fee submission for the purchase by making use of the submission forms/process factor is done. The documentation is fairly simple and the closing is typically done within 24 to 48 hours. As for the documentation, it requires the copy of the client fee agreement, the copy of the judgment or settlement, should be signed by the defendant, insurance company or the other payor and also, should have a letter of instruction from the attorney to payor which directs payments to the lockbox or bank of the factor.
Number 3. Acceptance – basically, it solely depends on the factor whether to accept the purchase of fees or not. The discount will be included too in the factor’s fee and to any margin or haircut form of the face value where the factor is necessary. Most of the time, factoring of the legal fees cuts haircut if ever the payor has a credible and trustworthy record.
The letter and even the assignment of instruction from you will be sent to the payor of fee which is the insurance company.
Number 4. Payment – the payer needs to send checks to the factor in which the amount is credited to your account as received. If ever the payor paid in timely manner meaning less than 3 months, you’ll get a rebate when enough money is collected in closing a particular transaction.