Lawsuits are supposed to help people get justice, but it’s not always that simple. The legal system can be slow, defendants are often experienced at navigating it, and plaintiffs can find themselves in desperate financial situations. This often leads to a common problem: plaintiffs settle too early for far less than they deserve, simply because they can’t afford to wait for a fair outcome.

At Justice Bolt, we call this the “desperation tax”—the difference between what a plaintiff receives by settling too soon, out of financial need, and what they could have received if they waited for a full settlement. This is a “tax” no one wants to pay.

Each year in the United States, the desperation tax costs plaintiffs billions of dollars. It disproportionately impacts those who don’t have the financial flexibility to hold out—often small businesses or individuals from lower-income backgrounds.

Why Do Plaintiffs Pay the Desperation Tax?

Avoiding the desperation tax by holding out for a fair offer sounds simple, but it’s rarely that easy. Many plaintiffs are already dealing with financial difficulties that only get worse due to medical bills, legal fees, or lost wages from being unable to work. Traditional loans from banks often aren’t an option because they require good credit or assets, which many plaintiffs don’t have.

Leveraging an Asset: The Lawsuit

Fortunately, plaintiffs have a powerful asset they can use: their lawsuit. The potential settlement from a lawsuit is a real asset, but traditional banks and lenders aren’t equipped to evaluate the risk. This is where legal funding companies come in. Legal funding allows plaintiffs to receive money upfront based on the expected outcome of their case, helping them cover living expenses and medical bills while they wait for the legal process to run its course.

Legal funding is not a loan; it’s an investment. If the plaintiff doesn’t win their case, they don’t owe anything back. This is why legal funding tends to be more expensive—there’s a risk that the investment won’t be recovered. But for many plaintiffs, it’s the only way to avoid the desperation tax and hold out for the settlement they deserve.

Making Informed Decisions

Deciding whether or not to take legal funding is a major decision, and plaintiffs should always consult with their attorneys before making a choice. Most legal funding companies require attorney involvement and approval for any funding agreement, ensuring that the decision is well-advised.

Each case is unique, so it’s important for plaintiffs to carefully consider their financial situation and their case’s outlook when deciding whether to pursue legal funding.

Protecting Access to Justice

Unfortunately, not every plaintiff has the option to access legal funding. Some states have laws that restrict or even ban legal funding, often pushed by large insurance companies and corporate defendants who benefit from plaintiffs settling early. Without access to legal funding, many plaintiffs are left with no choice but to accept less than they deserve.

At Justice Bolt, we believe that plaintiffs should have access to more options, not fewer. Legal funding, while not perfect, is a valuable tool that helps plaintiffs avoid the desperation tax and fight for a fair outcome in their lawsuits.