By Michael Shemtoub, trial attorney, Beverly Law. Updated November 2026.
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Two separate contracts
A funded case has two agreements that do not depend on each other. The fee agreement is between you and your lawyer. The funding contract is between you and the company. Your lawyer is not the one selling part of the claim, though in many states the lawyer signs an acknowledgment inside the funding contract.
California’s acknowledgment shows how the pieces fit. The retained attorney confirms being paid on a contingency basis under a written agreement, that all proceeds will go through the client trust account or a settlement fund, and that the attorney has not received a referral fee or other consideration from the funder (Bus. & Prof. Code 6251(c)). The statute confirms the fee arrangement. It does not change it. Our page on whether your lawyer has to sign covers the acknowledgment in detail.
The money also flows in one direction only. California bars a funder from paying court costs, filing fees or attorney fees out of the funding (section 6254(a)), and Illinois bars a funder from knowingly paying them (815 ILCS 121/15). Missouri’s definition requires the consumer to use the money for personal or household needs, not attorney fees or litigation costs (RSMo 436.552). The advance is your money for living expenses. It is not a case expense your lawyer advanced.
How the fee is figured: on the gross or after costs
The fee agreement decides whether the percentage applies to the full settlement or to what is left after case costs. California requires a contingency fee contract to state “how disbursements and costs incurred in connection with the prosecution or settlement of the claim” will “affect the contingency fee and the client’s recovery” (Bus. & Prof. Code 6147(a)(2)). Washington RPC 1.5(c)(2) requires the agreement to state “whether such expenses are to be deducted before or after the contingent fee is calculated” (Washington RPC 1.5). Texas Rule 1.04(d) uses nearly the same words (Texas Rule 1.04).
Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou.
None of these rules treats a funding payoff as a cost of the case, and a funding contract signed later does not rewrite the fee agreement. Our FAQ on what percentage accident lawyers take explains how fee percentages are set.
Who gets paid in what order
When the case resolves, the money goes into your lawyer’s trust account and is paid out under your agreements and the lien laws that apply. Georgia’s statute writes the funder’s place into law: a funder may not recover more than the share of the proceeds the plaintiffs recover “after the payment of any attorney’s fees and costs” (O.C.G.A. 7-10-4(a)(4)). Most states have no such rule, and the contract and lien laws decide. Our pages on how an advance is paid back and funding and medical liens cover the ranking of liens.
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Example only: the same settlement, with and without an advance
These are round hypothetical numbers, not any firm’s fee or any company’s price. Your fee agreement, your actual costs and liens, and your funding contract decide the real figures.
| Example only | No advance, fee on gross | $5,000 advance, fee on gross | $5,000 advance, fee after costs |
|---|---|---|---|
| Settlement | $90,000 | $90,000 | $90,000 |
| Case costs | $4,500 | $4,500 | $4,500 |
| Attorney fee (one-third, hypothetical) | $30,000 | $30,000 | $28,500 |
| Medical liens after reductions | $15,000 | $15,000 | $15,000 |
| Left for you before any funder | $40,500 | $40,500 | $42,000 |
| Funding company payoff (hypothetical) | $0 | $9,000 | $9,000 |
| Paid to you at the end | $40,500 | $31,500 | $33,000 |
Compare the first two columns. The fee is $30,000 either way. The $9,000 payoff comes entirely out of the client’s side. The third column shows that the fee agreement’s method moves the fee by $1,500 in this example, while the payoff stays the same. To see fees, costs and liens worked through at one settlement size, read how much of a $100,000 settlement you keep.
Laws that keep the lawyer’s money and the funder’s money apart
| State | Rule | Law |
|---|---|---|
| California | Funder may not pay or accept referral fees or other consideration from attorneys; your lawyer and the lawyer’s immediate family may not hold a financial interest in a funder or fund you directly; a lawyer who referred you may not hold an interest in your funder | 6254(a), 6256(a)-(b) |
| Illinois | Funder may not pay or accept referral fees from attorneys; your lawyer or a referring lawyer may not have a financial interest in the funder, and a funding that breaks that rule is void | 815 ILCS 121/15, 121/45 |
| Georgia | Funder may not pay or accept referral fees, including to or from an attorney; your lawyer must acknowledge in the contract that none was paid or received | O.C.G.A. 7-10-4(a)(2)-(3), 7-10-6(e) |
In California, a lawyer who violates section 6256 is subject to State Bar discipline (section 6256(e)).
What to ask before you sign
- Is my fee figured on the gross settlement or after costs?
- Will the funding payoff appear on my settlement statement as its own line, apart from your fee?
- Do you or anyone at your firm have any relationship with this company?
- Will you charge anything for reviewing the funding contract?
- If the case settles for less than expected, what is left for me after the fee, costs, liens and payoff?
Common questions
Does my lawyer get a share of the advance?
No, in states such as California, Illinois and Georgia, which bar referral fees and other payments between funders and lawyers.
Does the advance come out of my lawyer's fee?
Generally no. It is repaid from your share. A lawyer can choose to reduce a fee, and for most claims California requires fee agreements to say the fee “is not set by law but is negotiable,” but nothing in the funding statutes we read requires a reduction.
Can my lawyer charge extra for dealing with the funder?
California requires a contingency fee contract to state to what extent, if any, you could be required to pay the lawyer for related matters it does not cover (section 6147(a)(3)). Check your agreement and ask.
If I lose, do I owe my lawyer or the funder?
Under a nonrecourse contract you generally owe the funder nothing. Whether you owe your lawyer anything, such as costs, depends on your fee agreement and state rules. Washington, for example, keeps the client ultimately liable for litigation expenses outside class actions (RPC 1.8(e)).
Is an advance worth what it takes from my share?
That depends on your need and your case. Our page on whether pre-settlement funding is worth it lays out the questions. If your lawyer objects to the advance itself, see what happens if your lawyer says no. The lawsuit cash advance guide has the rest of this section. Beverly Law does not offer or arrange lawsuit funding and receives no payment from funding companies. Beverly Law offers a free case review in English or Spanish at (310) 552-6959 if you have questions about your injury case. You owe no fees or costs unless we win.
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Related pages
Cash advance on a lawsuit · Laws by state · Injury law FAQs
Sources
- California AB 931 (Bus. & Prof. Code 6250-6256), official bill text (leginfo.legislature.ca.gov)
- California AB 931, chaptered text (CalMatters Digital Democracy) (calmatters.digitaldemocracy.org)
- Cal. Bus. & Prof. Code 6147 (california.public.law)
- Washington RPC 1.5 (Washington Courts) (courts.wa.gov)
- Washington RPC 1.8 (Washington Courts) (courts.wa.gov)
- Texas Disciplinary Rules of Professional Conduct, Rule 1.04 (Texas Center for Legal Ethics) (legalethicstexas.com)
- Georgia SB 69 (2025), as signed (O.C.G.A. 7-10-1 to 7-10-11) (gov.georgia.gov)
- Illinois Consumer Legal Funding Act, 815 ILCS 121 (ilga.gov)
- Missouri RSMo 436.552 (revisor.mo.gov)
Important: This page is general information, not legal or medical advice, and reading it does not create an attorney-client relationship. Every case is different; talk to a lawyer about yours. Texas cases are handled by the firm’s Texas-licensed attorneys, Joyce Ondich and John Efstathiou. Last reviewed: November 7, 2026.