What Happens If I Lose My Case After Receiving Pre-Settlement Funding?

If you lose your case, you owe nothing. The non-recourse structure means the funder absorbs the entire loss. Your personal assets, income, and credit are never at risk.

If your case is dismissed, results in a defense verdict, or otherwise fails to produce a recovery, you owe nothing to the pre-settlement funder. The advance is fully extinguished. This is the defining feature of non-recourse funding and the central promise of the product: the funder assumes all case risk.

This means the funder cannot pursue you for the advance amount, cannot report unpaid funding to credit bureaus, cannot place a lien on your property, and cannot garnish your wages. The funding agreement does not create personal liability — it creates a right to a portion of future proceeds, and if those proceeds do not materialize, that right has no value and no enforceability.

When a case is lost, the process is straightforward: your attorney notifies the funder of the adverse outcome. The funder writes off the advance. The funding agreement is terminated. There is nothing you need to do, no paperwork to file, and no further obligation of any kind.

This structure means you can accept funding to get through a difficult period of litigation without creating a financial time bomb if the case does not go as hoped. The risk of being wrong about your case's outcome falls on the funder, not on you. This is precisely why funders conduct careful case evaluation before extending any advance — they need to be confident in the case's merits because they bear the entire downside.

Source: ALFA Consumer Litigation Funding Code of Conduct — Non-Recourse Consumer Protection Standards.

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