Funding
Buyout
A buyout is when one funding company pays off a claimant's existing advance with another company and replaces it with its own agreement, usually on better terms.
The situation it solves is a compounding or uncapped advance taken a year or more ago on a case that is still open, where the payoff figure has grown to consume most of the expected settlement.
A buyout stops the growth. It does not erase what has already accrued — the existing payoff is what gets bought out.
Get the current funder's written payoff figure first. Without it there is nothing to compare and no way to tell whether a buyout helps.
Related terms
- Compounding — Compounding is when charges are calculated on a balance that already includes previous charges, so the amount owed grows on itself over time.
- Cap — A cap is a hard ceiling on the total amount repayable on an advance, expressed as a multiple of the amount advanced — beyond which the balance stops growing regardless of how long the case runs.
- Pre-settlement funding — Pre-settlement funding is a non-recourse cash advance against a pending legal claim, repaid from the settlement if the case recovers and canceled entirely if it does not.
Need the money rather than the definition?
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