Lawsuit and Legal Funding Glossary of Terms

Note: this glossary provides definitions of terms as they apply to Lawsuit Funding (aka. Legal Funding). Several of these terms may have slightly different meanings if they are applied elsewhere.

Appeal
To ask a higher court to reverse the decision of a trial court after final judgment or other legal ruling.

Appeals Court
Any court (state or federal) which hears appeals from judgments and rulings of trial courts or lower appeals courts.

Bankruptcy
A federally regulated process whereby individuals or entities that have liabilities greater than assets seek judicial protection from creditors.

Bankruptcy - Chapter 13
A type of bankruptcy in which an individual keeps some of his or her assets and pays creditors according to an approved plan.

Bankruptcy - Chapter 7
A type of bankruptcy in which an individual’s debt is eliminated, but his or her assets are liquidated to repay creditors.

Bench Trial / Court Trial
A trial where the judge, rather than the jury, serves as fact finder and makes the final decision/judgment.

Beneficiary
The person or persons who are the recipient of a financial (or other) benefit contingent on the fulfillment of a contract. An example of this would be a person who receives a payment from a life insurance policy upon the death of another person.

Cash Advance
A cash advance is when one party, the payor, owes, or will owe, a sum of money to another party/person to be paid out at a future date, but instead the payor pays a portion of an expected future sum earlier than the scheduled payment date. A perfect example of a cash advance is if your employer gives you an advance on your paycheck. They are giving you money ahead of when you would normally get it.

Class Action
A lawsuit filed by one or more people on behalf of themselves and a larger group of people who have similar claims against the defendant.

Commercial Litigation
A lawsuit between a combination of individual(s) and or business(es).

Contingency
An event that might not occur.

Contingency Fee
Fees paid to an attorney for their services only if they are successful in obtaining a positive outcome from a lawsuit.

Contract
An agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit.

Court Order
A legally binding ruling issued by a judge.

Defendant
A person(s) or organization(s) who is served with court papers by another that is alleging a grievance.

Discount Rate
The interest rate used to compute the present value of future cash flows.

Discounted Present Value
The net present value of future payments, this is determined by discounting the future payments to the present.

Funds Transfer
Money that is withdrawn from one account and placed into a different account.

Insurance Settlement
The payment of proceeds by an insurance company to the insured to settle an insurance claim within the guidelines stipulated in the insurance policy.

Insured
The person who is insured under the policy.

Insurer
Party that provides insurance coverage typically through a contract of insurance.

Interested Parties
The payee, any beneficiary designated under the annuity contract to receive payments following the payee’s death and any other party that has continuing rights or obligations under the contract.

Judgment
The final decision by a court in a lawsuit or appeal from a lower court’s judgment. The word "decree" is sometimes used as synonymous with judgment.

Jury Trial
A trial of a lawsuit where the case is presented to a jury and the factual questions and the final judgment are determined by a jury. This is distinguished from a "court trial" in which the judge decides factual as well as legal questions, and makes the final judgment.

Lawsuit
A common term for a legal action by one person or organization against another person or organization, to be decided in a court of law.

Lawsuit Loan
A financial loan where the lender holds recourse if the borrower defaults on re-payment.

Legal Representative
A person acting for and legally authorized to execute a contract for an individual.

Liability
Legal responsibility for one’s actions or failure(s) to act.

Lien
Any official claim against property or funds for payment of a debt or an amount owed for services rendered.

Litigation
Any lawsuit or other resort to the courts to determine a legal question or matter.

Loan
A financial transaction where one party, the borrower, receives cash from another party, the lender, where the borrower must repay the initial cash borrowed plus accrued interest to the lender over time, usually in monthly installments. If the borrower fails to repay the amount due at the due date, the lender has recourse to seek to reclaim the amount owed.

Lump Sum
A sum of money paid in a single installment.

Multiplier
The number used to calculate how much is owed at the time of repayment. Unlike interest, a multiplier is usually a fixed number that only changes when certain conditions are met.

Negligence
According to Black’s Law Dictionary (5th Edition) "Negligence is the failure to use such care as a reasonably prudent and careful person would use under similar circumstances; it is the doing of some act which a person of ordinary prudence would not have done under the circumstances or failure to do what a person of ordinary prudence would have done under similar circumstances. Conduct which falls below the standard established by law for the protection of others is unreasonable risk of harm; it is a departure from the conduct expectable of a reasonably prudent person under like circumstances."


Net Value
The value of an estate after all debts have been paid.

Non-Recourse
"Without recourse." A financial transaction where the financial institution is only entitled to repayment from the profits of the project that the funds are funding, not from other assets of the recipient. In the case of plaintiff cash funding, non-recourse means that if the plaintiff receives cash funding and ends up losing their case, then they do not have to repay the funds.

Periodic Payments
Payments that are paid or received regularly, typically on a monthly or quarterly basis.

Personal Injury
An injury to a person’s body or mind, as the result of an accident.

Plaintiff
The person who initiates a lawsuit by filing a complaint with the clerk of the court against the defendant(s) demanding damages, performance and/or court determination of rights.

Principal
An initial sum of money invested prior to any fees or interest collected or paid.

Quote
A stated price for assets or services.

Recourse
Term describing a type of loan. If a loan is with recourse, the lender has the ability to fall back to the guarantor of the loan if the borrower fails to pay. (1) The ability of a lender to demand payment from a borrower if the collateral is insufficient to pay the debt in full, or even if the lender chooses not to attempt foreclosure of the collateral. (2) The requirement that the seller of a promissory note repurchase it if the borrower defaults. For example, Bank A has a loan with Company X. Bank A sells the loan to Bank B with recourse. If Company X defaults, Bank B can demand Bank A fulfill the loan obligation.

Settled Claim
When the original tort (i.e. personal injury or commercial lawsuit) claim is resolved.

Settlement
The resolution of a lawsuit (or of a legal dispute prior to filing a complaint or petition) without going forward to a final court judgment.

Settlement Offer
A written offer of a specific sum of money made by a defendant to a plaintiff, which will settle the lawsuit if accepted within a specific period of time.

Settlement Agreement
The arrangement made between an insurer and a policy owner (or beneficiary) concerning the manner in which the insurer will pay the policy proceeds to the beneficiary.

Settlement Date
The date agreed on for transferring funds to complete a transaction.

Structured Settlement
Settlement of claims or lawsuits by means of periodic payments.

Structured Settlement Agreement
The agreement, judgment, stipulation or release embodying the terms of a structured settlement, including the rights of the payee to receive periodic payments.

Terms of the Structured Settlement
Includes, with respect to any structured settlement, the terms of the structured settlement agreement, the annuity contract, any qualified assignment agreement and any order or approval of any court or responsible administrative authority or government authority authorizing or approving such structured settlement.

Tort
A body of the law which permits an injured person to recover compensation from the injuring party. When one person injures another, either intentionally or by negligence, a court may award money damages to the injured party so that they will suffer the pain caused by their action. A civil wrong or wrongful act, whether intentional or accidental, from which injury occurs to another. Torts include all negligence cases as well as intentional wrongs which result in harm.

Trust
An entity created to hold assets for the benefit of certain persons or entities, with a trustee managing the trust (and often holding title on behalf of the trust).

Trustee
A person or entity who holds the assets of a trust for the benefit of the beneficiaries and manages the trust and its assets under the terms of the trust stated in the declaration of trust which created it.

Underwriter
The insurance company receiving premiums and accepting responsibility for fulfilling the policy contract.

Verdict
The decision of a jury after a trial, which must be accepted by the trial judge to be final. A judgment by a judge sitting without a jury is not a verdict (see Judgment).

Workers Compensation
Compensation that covers the medical expenses and lost income of employees if they are hurt in the course of doing work-related activities. (Also known as workman’s comp, workers comp, workman’s compensation.)

Wrongful Death
When a person’s death is caused by the negligent or intentional act of another person or entity.