Stacking (Multiple Advances)

Stacking is the practice of a claimant obtaining pre-settlement funding advances from two or more separate funding companies against the same case, either simultaneously or sequentially, without necessarily paying off the earlier advance before taking the new one. Because each funder's assignment of proceeds attaches to the same limited pool of settlement funds, stacking creates a priority problem: absent clear agreement on lien position, multiple funders can have overlapping claims to proceeds that may not be sufficient to satisfy all of them in full, particularly once attorney fees, case costs, and medical liens are also deducted from the same settlement. Reputable funders screen for existing advances during underwriting specifically to avoid unknowingly stacking behind an undisclosed prior lien, and many require the claimant and attorney to disclose all existing funding relationships as a condition of approval, treating a discovered but undisclosed prior advance as grounds for denial or rescission. Stacking is a particular concern in consumer legal funding because, unlike a mortgage or auto loan where lien position is recorded in a public registry, there is generally no central database of pre-settlement funding liens, leaving disclosure largely dependent on the claimant's and attorney's candor. Some states have proposed or enacted disclosure requirements specifically aimed at reducing stacking risk, but no state currently operates a public lien registry comparable to those in secured lending.

Because there is no public registry of pre-settlement funding liens, funders rely almost entirely on attorney disclosure and direct questioning of the claimant to detect stacking, making the attorney relationship the primary control against a risk that would otherwise be difficult to price at all.

When stacking is discovered after the fact — typically at settlement, when proceeds prove insufficient to satisfy every funder in full — resolving competing claims usually falls to the disbursing attorney, which is why many firms now require full funding disclosure from clients as a matter of standard intake practice rather than waiting for a dispute to surface it.