Perfecting Security Interests: Exceptions And Enforcement, Part 3
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Once created, a security interest becomes a claim or lien on the settlement proceeds. Individual tort and commercial cases can be subject to numerous liens from attorneys, medical providers, other legal finance companies, government entities, and private individuals. In addition, portfolios of cases can also be subject to liens, primarily from financial institutions and investors. Lien analysis is a vital consideration for any underwriter because even if the merits, procedural posture, and other elements of a case are compelling enough to suggest a win, an investor still risks nonpayment if other stakeholders are entitled to a priority distribution from those proceeds.
In consumer transactions, almost all lawsuits involving personal injury have liens from third parties. The primary lien is for attorney’s fees, which is typically a third of any recovery, but in some circumstances can be as high as 50 percent of the recovery. Other liens include medical providers, Medicaid, workers compensation, Social Security and disability, child support, IRS or state tax authorities, and other funding companies, among others.
In commercial deals, it is also common to see third-party liens. If the attorney is on contingency, there will be a lien from the attorney. There may be civil judgments, as well as liens from the IRS, state, and sometimes foreign tax authorities, expert witnesses and other legal services providers, as well as legal finance companies and occasionally individuals who invested in the claim.
Read original articleTags: commercial cases, legal finance companies, medical providers
