When someone is going through a settlement case, it often means they are waiting for a pending lawsuit to finish so they can get their settlement funds. This money can go toward many things. It all depends on what the settlement case is about. Many settlements cases have to do with personal injury lawsuits, but they can be for many other reasons as well.
To "settle a case" means that a dispute someone brought to court has come to a close or a resolution of some kind. Sometimes the resolution to a court case includes payments like settlement money. This money may be used by the plaintiff to help cover medical costs after an accident or cover many other kinds of damages. Now that you understand what settlement money is, you may be wondering, what is pre-settlement funding? This type of advance funding can help people who are waiting for their settlement money.
So if settlement money is the money a plaintiff receives after settlement litigations are complete, then what is pre-settlement funding? Pre-settlement funding is a type of legal funding. It is a way for plaintiffs to get the money they need before the settlement case is actually over. Sometimes settlement lawsuits can take a long time to reach a conclusion. There are rounds of negotiations involved and terms of the lawsuit that need to be decided or "settled" on.
But in some settlement cases, the plaintiff may need money sooner. By applying for pre-settlement funding, clients can get money from their future settlement sooner rather than later. This allows clients to make important payments now while their case is underway.
Now that you understand the answer to the question, what is pre-settlement funding, a little better, we can talk about why someone might want to get pre-settlement funding. There are many reasons to get a pre-settlement advance that can benefit you as a settlement client. Not only can you get the money you need to make important payments now, but you can also afford to wait more time to win your case and potentially avoid settling for less money by settling early.
Any lawsuit comes with its own difficulties. There are pros and cons to all kinds of litigations. But one of the particular cons to settlement litigations is having to wait for the pending lawsuit to end to get the money you need. One of the aspects of how pre-settlement funding works is that clients wait until the case is over to get the funds they need. This can sometimes take a long time and some plaintiffs can’t afford this wait. With a pre-settlement advance you can get the money you need sooner.
Some settlement cases involve injuries that require medical attention. This medical attention can be costly depending on the care you need. When an injury occurs that was not your fault, this financial burden can be a lot to bear on top of everything else for accident victims. By getting pre-settlement funds, you can get the money you need to cover these essential medical costs sooner rather than later.
Some settlement cases involve damages to property, like a wrecked car or necessary home repairs. Paying to get your damaged property fixed after something happened that was out of your control can be costly and a very stressful time without worrying about money. By getting pre-settlement funding you can cover those necessary repair costs now.
Getting a higher settlement is not a guarantee when you apply for pre-settlement funding, but it is a possibility. This advance funding can provide the finances you need to wait out your settlement case longer. When you can wait longer to settle, it is possible to get a higher settlement in the end because you didn’t have to settle for less by settling early.
Now that you understand what pre-settlement funding is more, it is time to learn the answer to how does pre-settlement funding work? Pre-settlement funding companies like Scryp work hard to make their funding options work simply and easily. All you have to do is get together the information you have about your case and fill out the online application.
Once you have completed the online pre-settlement funding application, make sure you notify the lawyer working on your case about the application. They will be contacted by the pre-settlement funding provider and need to provide additional details about your case. This contact can potentially happen within 24 hours of applying, so make sure you contact your lawyer as soon as possible to let them know about the application.
All of this information will help the funding provider determine whether you qualify for this financing option. If you do get approved, then the funding provider will contact you to pay your pre-settlement money so you can take care of necessary expenses now.
The Internal Revenue Code (IRC) is the series of tax codes and laws that the Internal Revenue Services (IRS) uses to outline how taxes are dealt with. So questions like, do you have to pay taxes on a settlement or do you have to pay taxes on pre-settlement funding are answered in the IRC.
The IRS collects federal income tax, which includes all manner of income. The IRC Section 61 is the section that talks about federal income tax and what all is included as taxable income. This section states that all sources of income are taxable unless otherwise made exempt by another section of the IRC. But settlement money is not made exempt to taxes on the IRC, so it is included as a source of income and thus is taxable.
This means that if you received settlement money, make sure to include this income on your 1040 tax form when filing your tax returns for that year.
But, all or part of your settlement funding might not be taxed if it is used specifically to cover costs like medical bills, damaged property, etc. So long as the money is used for qualifying expenses, it can remain tax free. However, any extra money leftover for yourself, or money paid for emotional damages, will be taxable.
Pre-settlement funding is treated just like settlement funding when it comes to whether it can be taxed or not. Generally speaking, pre-settlement funding can be tax free when used specifically for qualifying expenses, but will be taxed if not used for qualifying expenses.
Non-Taxed Pre-Settlement Funding Expenses:
Settlement funding can be a financial lifesaver when you need money to cover medical costs and other necessary repairs for damages and harm you may have experienced. Pre-settlement funding can help you get that money even sooner so you can cover costs now.