What to Look For in a Lawsuit Funding Contract

By Michael Shemtoub, trial attorney, Beverly Law. Updated November 2026.

What state funding laws make a company disclose

Illinois offers a clear model. Section 30 of its Consumer Legal Funding Act (815 ILCS 121) requires the front page to show the funded amount, an itemized list of charges, the maximum total the consumer will pay, and a payment schedule with the amount due for each six-month period. Tennessee wants its disclosures in at least 14-point bold type and adds the maximum annual percentage fee (Tenn. Code 47-16-106).

California’s Consumer Legal Funding Act took effect January 1, 2026 and puts the funded amount, one-time charges, the maximum total owed and a repayment schedule on the first page (Bus. & Prof. Code 6252). Ohio’s new chapter, effective October 6, 2026, adds a cumulative total if you have more than one contract with the same company (R.C. 1357.03). Even without a statute in your state, these lists work as a yardstick. The state law table shows your state’s rules, and the lawsuit cash advance guide covers the basics.

A clause-by-clause checklist

1. The cash you actually receive, and every fee by name. Illinois allows a document fee of up to $75 that may be deducted from the funded amount (sec. 25). Maine’s disclosure statement must itemize application, processing, attorney review, broker and other fees (9-A M.R.S. 12-104). Nebraska requires the total broker fees on the front page (Neb. Rev. Stat. 25-3303).
2. How the charge grows with time. Illinois requires the amount owed to be based on intervals of time, never a percentage of your recovery, and caps charges at 18% of the funded amount assessed at the start of every six months (sec. 20 and 25).
3. Compounding. Maine and West Virginia allow fees to compound no more often than every six months (12-105; W. Va. Code 46A-6N-9). In the single-funder dataset studied by Ronen Avraham and Anthony Sebok, monthly compounding was the most common pricing, used in about 88% of completed cases (104 Cornell L. Rev. 1133).
4. Minimum charge periods. The same study found most contracts charged a minimum number of months however soon the case paid, plus interest “buckets” that worked like early-payment penalties. Ask what you would owe if the case settled next month.
5. A ceiling, a stop date and no rollovers. Look for one dollar figure you can never exceed. Illinois, Maine and West Virginia stop charges at 42 months; Tennessee limits the term to three years and, like West Virginia, bars folding an old balance into a new contract (47-16-110).
6. Prepayment penalties. California and Ohio ban them (Bus. & Prof. Code 6251(f); R.C. 1357.04(J)), and Ohio caps a one-time service fee at 7% of the funded amount.
7. Exceptions to “non-recourse.” These laws describe the money as repaid only from case proceeds, yet California’s maximum-payment rule and Ohio’s required statement both carve out fraud, misrepresentation or a material breach. Read how your contract defines breach.
8. Personal guaranties, co-signers and liens on your property. Money repaid only from your case should not need any of them. In Denemark v. New Chapter Capital, an advance tied to a divorce case, a New York appeals court held that a deal marked “THIS IS NOT A LOAN” was a usurious loan, pointing to the client’s personal guaranty and the funder’s right to file a UCC financing statement (2026 NY Slip Op 04553).
9. Events that make money due early. The Denemark contract also required repayment on events with no recovery, including bankruptcy and death. Ask what happens if you change lawyers. Georgia’s law requires a disclosure that you need not keep a particular attorney and owe no fees or damages for changing (SB 69), and California keeps the contract in force if you fire the attorney who signed it (6251(e)).
10. Arbitration, jury waivers and where disputes go. Maine, Tennessee, West Virginia and Vermont bar mandatory arbitration in these contracts (47-16-105; 46A-6N-4; 8 V.S.A. ch. 74). California bars a funder from seeking a waiver of your right to a jury trial (6254). A clause picking another state’s law may not hold: in Boling v. Prospect Funding Holdings, the Sixth Circuit applied Kentucky law despite a New York clause and found the agreements void and usurious.
11. What you are assigning. You should assign part of the proceeds, never the claim or any say over it, a line the North Carolina Court of Appeals drew in Odell v. Legal Bucks. Tennessee and West Virginia also limit a funder’s resale of your contract to unrelated third parties. If you already have an advance, read can you get a second lawsuit advance.
12. Your lawyer’s signed acknowledgment. California and Ohio require your attorney to state in the contract that the attorney reviewed the contract’s disclosures with you and took no referral fee, and California voids a contract without it (6251(c)-(d)). See does my lawyer have to sign a funding contract.

Example only, with round hypothetical numbers: a $2,000 advance priced at 3% a month adds $720 over 12 months if the charge is figured on the original $2,000. If the same 3% compounds monthly, the balance after 12 months is about $2,852. The contract terms decide what you owe, and our page on what pre-settlement funding costs explains the pricing methods.

What to ask before you sign

Ask the company for a written payoff table, month by month, through the last month charges can run, and keep it with your copy. Ask for a copy with every blank filled in: Tennessee and Ohio both require the contract to be complete when it is handed to you for signature (47-16-104; R.C. 1357.03). Then check how many days you have to back out, which varies by state, on our page about the right to cancel a lawsuit funding contract.

Common questions

Related pages

Cash advance on a lawsuit · Laws by state · Injury law FAQs

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.