What is a Case Bond?
A case bond occurs when a company or firm buys full or partial rights to the settlement of the lawsuit before or while litigation is still occurring. Litigation is extremely expensive, and high-profile cases can have attorneys’ fees and court costs amount to hundreds of thousands of dollars. The bond is offered to the litigant while the case is moving through court so they can pay for personal expenses.
What Happens if the Litigant Loses the Case?
Such a bond is sometimes a risky investment because the litigant is not required to pay anything to the company or firm that issued the bond if they lose the case. If the litigant wins the case, the bond automatically matures and the litigation pays for the bond with the funds obtained from the settlement.
Advantages and Disadvantages of a Case Bond
The advantages of such a bond allow a litigant to pay for expenses while the case is moving through court. The litigant may have a large amount of bills depending on the case, such as medical bills, living expenses, and even attorneys’ fees that need paid immediately. The bond allows the litigant to pay for these expenses and remain receive less intimidation of the court costs.
A common strategy used by large companies is to keep appealing the case to run up court costs and attorneys’ fees. The litigant thus becomes intimidated and may drop the case if the results are questionable. The bond allows the litigant to avoid other options of paying for the case like taking out a home equity line of credit or taking out a private loan.
The obvious disadvantage to agreeing to a case bond is being left with little or no settlement money after the case comes to an end. Such bonds come along with a fee as well. This fee can be large in some cases and offsets some of the risk taken on by the firm after issuing the bond. If the plaintiff wins the case, they will have to pay the fee along with the bond, which can further deplete their settlement money.
Talk with an Attorney before Agreeing to a Case Bond
It’s imperative that you speak with your attorney before agreeing to such a bond. Your attorney will be able to tell you about the risks involved and your chances of winning the case. The attorney can also help you fill out paperwork associated with the bond. The litigant is required to sign documents that give the bond company rights to the compensation at the end of the case.
Attorneys can issue a bond is some cases as well. The firm may issue the bond and provide conditions in the settlement agreement for the plaintiff to reimburse expenses at the end of the case—especially if the attorney is working on contingency.