All personal injury lawyers prepare their clients for the long wait between filing a claim and recovering compensation. That process can take years depending on factors such as the complexity of the accident and the liable party’s cooperation in negotiating a settlement. During this time, many clients struggle to make ends meet, especially if they’ve lost their jobs or need on-going medical treatments. This problem has gotten worse in the last couple of years due to COVID restrictions. The courts are starting to catch up, but most injury victims are still waiting for their paperwork to be processed, or to receive a hearing date.
If you are in this situation, you may have thought about applying for a loan while your case is pending. But your choices are limited when you’re out of work or have bad credit because of mounting bills that you’re unable to pay. As a last resort, you may have asked your attorney for an advance on your case, but they refused to help you.
At this point, you’re probably asking yourself, “What do I do if my lawyer won’t give me a loan?” Various options are available to you, but knowing which road to take can be difficult without proper guidance. Making the wrong choice can leave you with high interest rates and unreasonable repayment terms, so that you continue to struggle financially even after you win your case. To ensure your quality of life in the long run, it’s best to seek guidance from a qualified personal injury attorney.
To learn more about your rights as an injury victim, speak with the lawyers of Normandie Law Firm.
Is it Legal for My Attorney to Give Me a Loan?
Yes, it is legal for your attorney to give you a loan for living expenses while you are in litigation. We want to make this clear once and for all, because there is a lot of confusion over this issue. One reason for the confusion is that each state has its own rules regarding attorney-client loans. In states like Pennsylvania, for example, attorneys are explicitly banned from loaning a client money under any circumstances. Additionally, California state laws regarding attorney-client loans are confusing, particularly Rule 1.8.5(a), which says: “A lawyer shall not directly or indirectly pay or agree to pay, guarantee, or represent that the lawyer or lawyer’s law firm will pay the personal or business expenses of a prospective or existing client.”
However, that rule is followed up by section (b), which states: “a lawyer may after the lawyer is retained by the client, agree to lend money to the client based on the client’s written promise to repay the loan.”
These rules seem to cancel each other out, but here’s what it comes down to: In California, a lawyer can financially assist their client if they’re struggling to make ends meet. There are, however, some important guidelines that must be followed by both the client and attorney.
- The loan must be for reasonable living expenses.
By “reasonable,” we mean basic living expenses like rent, utilities, and food. Thus, an attorney cannot loan their client money for things like non-emergency renovations, starting a new business, or paying off their parking tickets. A lawyer should also avoid giving loans to help out a client with unrelated legal issues. For example, the California state bar sanctioned an attorney for co-signing a $50,000 loan, which was used to post bail for the client in a criminal matter unrelated to the personal injury case. When the client refused to pay back the money, the lawyer ended up repaying the entire loan plus interest, and was admonished by the board for violating Rule 1.18(e).
- An attorney cannot require that the client change counsel in order to obtain a loan.
Clients are sometimes forced to change attorneys in the middle of a case, though this is not a decision that should be made lightly. Before changing attorneys, a client should obtain a second opinion from another lawyer to make sure they’re making the right choice. During the consultation, a lawyer should not be using the promise of a loan to pressure you into changing counsel. Not only is this an ethics violation, it indicates that the lawyer may see you as a dollar amount rather than a fellow human being. A lawyer can, of course, talk about advance loans if you ask about it. However, they should never employ a “hard sell” tactic to get you to switch lawyers.
- There must be a written contract for the loan.
Rule 1.8.5(b) requires that clients sign off on a “written promise to repay the loan,” meaning there should be a loan contract between the lawyer and their client. Written contracts make it clear what the loan terms are, and advise you of your rights prior to agreeing on the loan, like having another lawyer look over the contract. An independent attorney review is not required, but it’s highly recommended in order to ensure that you understand your rights. Any lawyer who is offering you a legitimate, fair contract should have no problems with you consulting another attorney.
- The attorney must explain the terms of the loan in a clear, reasonable manner.
In Hunniecut versus the State Bar, the California Supreme Court ruled, “the attorney bears the burden of showing that the dealings between the parties were fair and reasonable and were fully known and understood by the client.” With an attorney-client loan, the loan terms, including payment dates, installment amounts, etc., must be clear and reasonable for that specific client. The lawyer must also explain these terms in a manner that can be understood by the client.
Our lawyers will be happy to explain these rules to you in more detail, along with other critical information regarding advance loans in a personal injury case. Contact Normandie Law Firm and schedule a free consultation.
Why is My Lawyer Not Giving Me an Advance on My Case?
The above information is something we go over quite often during a second opinion consultation. Afterwards, clients typically ask, “If my attorney is allowed to give me a loan, why are they saying no?” We can’t know for sure what your lawyer is thinking, but one possibility is conflict of interest. If your lawyer advances you money during the lawsuit, they now have a greater stake in the outcome of your case. As a result, they may feel pressured to talk you into a settlement, even if it’s not in your best interest to do so. While this is a possibility, an experienced attorney should be able to put aside these conflicts and do whatever they can to help their client.
In our practice, we find that fighting for the most optimal settlement is the best thing for everybody in the long run. If a client accepts an inadequate settlement, they may be able to start paying on the loan, but will probably run out of money before they can pay it off. Waiting for the compensation that the client deserves provides the best outcome for all the involved parties, but some lawyers have trouble seeing the big picture when it comes to their client’s needs. This quality may not serve you well in other areas of your case, considering personal injury claims require time and patience.
Other lawyers may view such loans as unethical, as it could change the traditional nature of the attorney-client relationship. We can understand where they’re coming from, but the reality is, many clients are on the brink of financial ruin as a result of their injuries. After a few months of non-stop doctor’s appointments and missing time from work, they may be on the verge of homelessness, or having to decide between paying for food or medication. California law recognizes this dilemma and allows attorneys to help indigent clients at their own discretion.
My Lawyer is Refusing to Talk to a Lending Company
Your attorney is not the only source you can go to for a loan on your case. Some clients obtain loans from lawsuit funding companies and pay back the money once they win their case. As part of your application process, your attorney will need to supply the company with information about your case. And that brings us to another problem we often hear about from prospective clients: “My attorney won’t give my file to a cash advance company for a loan I need on my case.”
Unfortunately, this is another situation where your attorney may be worried about ethics violations. The core principle of any legal action is attorney-client privilege, which has to do with confidentiality regarding all communications between you and your attorney. This is extremely important, as any leaked information about your case can compromise your settlement award. Thus, your lawyer may refuse to cooperate with third party lenders, who will not only ask for current information in your file, but periodic updates throughout the lawsuit process.
Your lawyer may also have issues with the loan terms offered by these companies. While we can’t speak for every third party lenders, some companies offer predatory interest rates that can double or even triple what the client needs to pay back. We’ve seen quite a few of these victims struggle to repay their loans while paying for doctor’s visits and living expenses at the same time. Frankly, your attorney may feel like they’re protecting you by keeping you away from these companies. But that doesn’t help you when you’re facing eviction or some other devastating consequence of an injury. That brings us to another question we get on a frequent basis: “Can I switch my lawyer if my current lawyer is not giving me a loan on my personal injury case?”
If you’re unhappy with your lawyer’s services, please contact Normandie Law Firm. Our lawyers have the experience to know if your case is being handled properly.
Can I Switch My Lawyer?
Yes, you can switch your lawyer at any point during a personal injury lawsuit. If your lawyer won’t advance you a loan or refuses to talk to a lawsuit funding company on your behalf, you may have no choice but to seek other counsel. However, making the choice comes with its own set of consequences, so you should think long and hard before you make the switch. You are probably doing that right now, and wondering, “How do I know when it’s time to find a lawyer that can give me an advance on my personal injury case?”
Ideally, you want to transfer your case to another law firm as soon as possible. The earlier you do this in the claim process, the less consequences you will have to deal with, including working out a split fee agreement with your old attorney. But don’t let that discourage you from changing counsel, since it’s far worse to stick with a lawyer who doesn’t have your best interests at heart. To help you make an informed decision, make sure to get a second opinion from another personal injury lawyer. A knowledgeable attorney can review your case to ensure that your lawyer is doing their job. They can also answer your questions about advance loans on your case so that you are aware of all your available options. Furthermore, an honest, ethical attorney will not use the promise of a loan to pressure you into switching over to them. That decision is always up to you, but qualified legal advice is essential for making that choice.
Free Second Opinions
In our many years of fighting for injury victims, there’s one principle that has guided us: no victim should ever have to pay for legal services. That’s why we operate under a Zero-fee guarantee, where clients pay nothing upfront for any of our services. That includes free second opinions if you already have an attorney, since victims have the right to know if they are receiving high quality legal representation. During a consultation, we can answer your questions regarding your attorney’s work, as well as the process involved if you decide to transfer your case to our law firm. If you decide to work with us, you will never be charged for our services until we win your case. And if we lose your case, you pay us nothing as a part of our Zero-fee guarantee.
Don’t wait to find out about your legal options. Contact our office and speak to a Los Angeles lawsuit attorney.
