Understanding Lawsuit Cash Advance Regulations in Texas

 

Texas has been a forerunner in embracing alternative funding agreements, including contingency fees in legal cases, with lawsuit funding being a natural progression of this trend.

​

In Texas, lawyers are prohibited from obtaining a proprietary interest in the subject of litigation they are handling. However, this restriction does not extend to third parties. State laws allow funders to acquire a contingent right to a share of the plaintiff’s settlement in case of a win. As such, the plaintiff is not obligated to repay the cash advance if the case is lost, classifying these transactions as investments rather than loans. This distinction means they are not subject to usury laws, affirming the legality of pre-settlement funding in Texas.

​

At AARC, we offer financial assistance and share in the proceeds if the client wins their case. While we keep informed about case outcomes, we do not involve ourselves in the legal strategy or settlement terms, ensuring no control over the case.

Similar to other states, Texas requires any existing liens from previous funding to be settled before additional funding can be provided.

​

Texas Personal Injury Law and Its Impact on Legal Funding: The statute of limitations in Texas allows an injured party two years from the injury date to file a lawsuit. Missing this deadline likely forfeits the right to compensation.

​

If a government entity or employee is potentially liable for an injury, such as a slip on poorly maintained government property, the claim must be filed within six months. Claims against the government must specify the injury details, when and where it happened, and a summary of the incident.

​

Texas employs a modified comparative negligence rule, reducing compensation by the plaintiff's percentage of fault. For example, being 15% responsible for an injury means forfeiting 15% of the settlement. If more than 50% at fault, the plaintiff receives no compensation.

​

In dog attack cases, Texas follows the “one bite” rule, holding owners liable only if it is proven they knew of the dog's dangerous nature.

​

For car accidents, Texas has at-fault laws, with the at-fault driver's insurance responsible for compensation. The comparative negligence rule applies if both parties share fault. Required insurance coverage includes:

• $30,000 bodily injury liability per person

• $60,000 bodily injury liability per accident

• $25,000 property damage liability per accident

​

Given that most Texas drivers carry only minimum insurance, having uninsured motorist coverage is recommended for protection against underinsured or uninsured drivers, including in hit-and-run scenarios.