By Michael Shemtoub, trial attorney, Beverly Law. Updated November 2026.
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What “non-recourse” means
Non-recourse means the company can collect only from the proceeds of your claim. If the claim produces nothing, the company cannot collect from your other money or property. The GAO put it plainly in its 2022 report: “Plaintiffs do not have to repay the funding if they lose the case” (GAO-23-105210). Illinois writes the same idea into its definition of consumer legal funding: “if no proceeds are obtained from the consumer’s legal claim, the consumer is not required to repay the company” (815 ILCS 121/5).
That risk of loss is what the company is paid for, and it is part of why the charges are high. It is also why courts check whether the risk is real. When a Michigan funder advanced money after a verdict and judgment were already in place, the court treated the deal as a loan (Lawsuit Financial v. Curry). Our page on whether an advance is a loan covers those cases.
What state laws require the contract to say
Many funding statutes require a boxed statement, usually in capital letters, telling you what happens if there is no recovery. The wording is close from state to state, but the exceptions differ.
| State | Required promise | Exceptions named in the statute |
|---|---|---|
| Ohio | You will not owe the company “anything if there are no proceeds from your legal claim” | Violating a material term; fraud against the company (R.C. 1357.03) |
| Nevada | Charges are paid only from, and only to the extent of, available proceeds | Violating a material term; knowingly giving false information; fraud (NRS 604C.360) |
| Missouri | Nothing owed if there is no recovery, and nothing beyond your recovery | A material term violated by you or your attorney; fraud (RSMo § 436.560) |
| Kansas | Nothing owed if there are no proceeds | Violating a material term; fraud (2026 Kan. Sess. Laws ch. 130, sec. 3) |
| Indiana | Payable only from the proceeds of the civil proceeding | Violating a material term; fraud (Ind. Code 24-12) |
| New York | Charges payable only to the extent there are available proceeds | Violating a material term; fraud; the consumer may face a breach of contract claim for material breach, fraud or material misrepresentation (L. 2026, ch. 11) |
Missouri’s version is worth noticing because a breach by your attorney, not only by you, can also take away the protection. States without a funding statute leave the wording to the contract, so read it closely. Our state law table shows which states have these rules.
Settling for less than you owe
Losing outright is the simple case. A low settlement is more common. Under the statutory language above, the company is paid only “to the extent that there are available proceeds,” in the words of the Nevada and Ohio notices, and Missouri says you will not owe “anything in excess of your recovery.” In the Minnesota case that reached the state Supreme Court, the contract itself said the amount owed could not exceed the settlement (Maslowski v. Prospect Funding Partners (Minn. 2020)).
What counts as “proceeds” matters. Read whether the contract measures them before or after attorney fees, costs and medical liens, because that decides how much of a small settlement the company can reach. Our page on funding and medical liens explains how those payments are ordered.
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Firing your lawyer or changing lawyers
Changing lawyers does not end the contract. Nevada and Kansas both say a compliant contract stays valid and enforceable if you end the relationship with your first attorney or hire a new one (NRS 604C.350; 2026 Kan. Sess. Laws ch. 130, sec. 3(e)). Your new lawyer will need a copy of the funding contract so the company can be paid at the end.
Dropping the case
If you decide to stop pursuing the claim, the result depends on the contract. Nevada’s statute treats the date a claim “is lost or abandoned” as a resolution date (NRS 604C.170), but it does not spell out a separate payment rule for abandonment. A contract may treat walking away from a valid claim, refusing to cooperate with your lawyer or accepting money outside the case as a breach of a material term, which is one of the exceptions. Ask how the contract defines abandonment before you sign, and talk to your lawyer before you drop a funded claim.
Fraud and misrepresentation
The exceptions exist for cases where the client misled the company. Examples include hiding an earlier advance on the same claim, giving false information about the accident or injuries, or collecting a settlement without telling the company. West Virginia bars a funder from knowingly funding someone who already assigned part of the proceeds unless the earlier funder is paid first or agrees otherwise (W. Va. Code § 46A-6N-9(g)), so the application will ask about earlier advances. Answer every question truthfully. Ohio’s law also excludes penalties for “material breach, fraud, or misrepresentation” from the maximum amount the contract must disclose, so the stated maximum does not limit those penalties (R.C. 1357.03).
What to ask before you sign
- Does the contract say in plain words that I owe nothing if I recover nothing?
- What exceptions does it list, and how does it define a “material term”?
- Is there any event other than a recovery that makes me owe money, such as death, bankruptcy or a lien on my property? In a 2026 New York appeals case about a divorce funding contract, terms like those led the court to treat it as a loan (Denemark v. New Chapter Capital).
- How does the contract define “proceeds,” and does a breach by my lawyer affect me?
- What happens if I change lawyers or decide to drop the claim?
Our page on funding contract red flags lists more terms to check.
Common questions
If I lose at trial and appeal, do charges keep growing?
Usually, until the claim is resolved or the contract’s time limit is reached. Some states stop charges after a set period, such as 42 months in Illinois and West Virginia. If the appeal fails and nothing is recovered, a non-recourse contract still means you owe nothing.
Can the funding company sue me if I lose?
Not for the advance itself under a true non-recourse contract. It could try if it claims you committed fraud or broke a material term, which is why honesty on the application matters.
What if my settlement is smaller than my medical bills?
Liens, fees and the funder may all claim the same small recovery. The statutes above limit the funder to available proceeds, but the order of payment depends on lien law and the contract. See our page on what happens if you lose a car accident lawsuit for the lawsuit side of a loss.
Do I owe anything if my lawyer withdraws from my case?
The contract usually stays in place, and a new lawyer can take over the case. If no lawyer takes it and the claim recovers nothing, a non-recourse contract means nothing is owed, unless one of the exceptions applies.
Where can I compare these rules for other topics?
The lawsuit cash advance guide links every page in 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
- GAO-23-105210, Third-Party Litigation Financing (Dec. 2022) (gao.gov)
- Illinois Consumer Legal Funding Act, 815 ILCS 121 (ilga.gov)
- Ohio Revised Code 1357.03 (codes.ohio.gov)
- Nevada NRS Chapter 604C (leg.state.nv.us)
- Missouri RSMo 436.560 (revisor.mo.gov)
- Kansas HB 2518 (2026 Sess. Laws ch. 130) (kssos.org)
- Indiana Code 24-12 (copy posted by NCOIL) (ncoil.org)
- New York A.9442 / S.8808 (L. 2026, ch. 11) (nysenate.gov)
- Maslowski v. Prospect Funding Partners LLC, No. A18-1906 (Minn. 2020) (law.justia.com)
- West Virginia Code 46A-6N-9 (code.wvlegislature.gov)
- Denemark v. New Chapter Capital, Inc., 2026 NY Slip Op 04553 (storage.courtlistener.com)
- Lawsuit Financial, L.L.C. v. Curry, 261 Mich. App. 579 (2004) (law.justia.com)
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.