Pre-settlement funding requirements: who qualifies?

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

The basic requirements

State statutes describe the person they protect in similar words. California defines a consumer as “a natural person who has a pending legal claim and who resides or is domiciled in California,” and a legal claim as a bona fide civil claim or cause of action (Bus. & Prof. Code 6250). Illinois uses the same structure (815 ILCS 121/5). Put together, the usual starting points are these:

• You are an individual, not a business.
• You have a claim that is pending. California defines a legal claim as “a bona fide civil claim or cause of action,” so it generally need not already be a filed lawsuit.
• You have a lawyer. In California, Illinois and New York the contract is void without the retained attorney’s written acknowledgment, which also confirms the lawyer is paid on a contingency fee (B&P 6251(c)-(d)).
• The money is for your own needs. Missouri’s definition requires the consumer to use it for personal or household expenses, not attorney fees or litigation costs (RSMo 436.552). Oklahoma’s covers money provided “for a purpose other than prosecuting the consumer’s legal claim” (14A O.S. 3-801).

Meeting these points makes you eligible to apply. The company still decides whether to fund, based on its review of the case; see why funding gets denied.

Do you need a job or good credit?

Not under the statutes’ own terms. Because the transaction is defined as nonrecourse, repayment is tied to the case. Illinois calls it “a nonrecourse transaction” in which the company buys a contingent interest in the potential net proceeds of your claim. The only credit report the Illinois Act mentions is one tied to a company’s license application, not a check on the consumer (815 ILCS 121/75).

What funders review is mostly the case. GAO reported that consumer funders consider whether the defendant’s liability has been established and whether the defendant has insurance (GAO-23-105210, p. 14). The funder studied by Ronen Avraham and Anthony Sebok recorded “the amount of time the client was out of work,” which bears on the lost-wage part of the claim, and checked whether the plaintiff had ever filed for bankruptcy (104 Cornell L. Rev. 1133, 1141, 1148 (2019)). A company may still ask about income or credit for its own reasons, so ask before you authorize any check. Our page on bad credit and lawsuit advances covers credit reports and bankruptcy.

Where you live and where the claim is

Each state’s statute decides whom it covers, and the tests differ.

These definitions decide which state’s protections apply to you, such as its cancellation period and fee rules. If you were hurt in one state and live in another, ask the company which law it says governs the contract, and check both states in our state law table. The New York text is covered on our New York page.

Claims that may not qualify

• Workers’ compensation. Oklahoma’s definition of a legal claim excludes workers’ compensation claims, “which are not assignable.” In California, a comp claim “is not assignable before payment” (Cal. Lab. Code 4900), and Washington bars assigning money payable under its industrial insurance law (RCW 51.32.040). A separate injury claim against someone other than your employer is a different matter; see the workers’ compensation page.
• Large amounts. New York’s law covers fundings of no more than $500,000, and Missouri’s covers contracts for less than $500,000.
• Claims already sold in part. California bars funding a consumer whose proceeds were already assigned unless that assignment is first satisfied (B&P 6254(a)).

Minors and people who cannot sign for themselves

A child’s claim is controlled by a court. In California, a parent’s compromise of a minor’s disputed claim “is valid only after it has been approved, upon the filing of a petition, by the superior court,” and the money is paid out under the Probate Code’s rules for minors (Prob. Code 3500(b)-(c)). Washington’s rule covers any settlement “involving the beneficial interest of an unemancipated minor” or an incapacitated person; the petition must list all liens and fees, and the court can direct the net money into “a blocked account” or a trust, among other options (SPR 98.16W).

None of the consumer funding statutes we read sets rules for minors as consumers. Because a judge oversees the child’s recovery, a parent generally cannot freely sell part of it. A parent’s own claim, such as for the child’s medical bills, raises different questions covered on our page on a child’s injury case.

What to ask before you sign

• Which state’s law do you say covers this contract, given where I live and where my case is?
• Do you need my lawyer’s acknowledgment, and what case documents will you ask for?
• Do you check credit or income, and will it affect my credit report?
• Is any part of my claim, such as workers’ compensation, excluded?
• If my case involves a minor, how will court approval affect your 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.