Ohio Pre-Settlement Funding: Costs, Contract Rules, and HB 105

Ohio pre-settlement funding is a non-recourse cash advance a plaintiff can take against a pending personal injury or civil lawsuit, repaid out of the settlement or verdict only if the case wins. If the case loses, the plaintiff typically owes nothing. These contracts have been legal in Ohio since 2008 under Ohio Revised Code § 1349.55, which requires specific disclosures and gives you a short window to back out, but places no cap on the fees a funding company can charge.1Ohio Legislative Service Commission. Ohio Revised Code Section 1349.55 A bill awaiting the governor’s signature in mid-2026 would change that.2NFIB. Small Businesses Praise Passage of Litigation Financing Transparency Bill

How It Works and What You Can Get

Pre-settlement funding is not a loan in the usual sense. Repayment depends on winning the case, so the funder, not you, carries the risk if the lawsuit fails.3New York State Bar Association. New York’s Unregulated Litigation Lending Industry Because repayment hinges on an uncertain future event, most jurisdictions treat the transaction as a purchase of a contingent interest in the lawsuit rather than as a loan subject to usury caps.4Federal Judicial Center. Third-Party Litigation Finance

The process is short. You apply with basic case information. The funding company then contacts your attorney for medical records, accident reports, and filings; attorney cooperation is mandatory because the underwriter is evaluating the strength of your claim rather than your credit, income, or employment.5Rockpoint Legal Funding. Ohio Legal Funding6Oasis Financial. The Role of Your Attorney in Pre-Settlement Funding If approved, you’ll get an offer stating the advance amount, fees, and repayment terms. Funds usually arrive within 24 to 48 hours of signing.7Gain Servicing. Guaranteed Pre-Settlement Funding

Advances typically run 10 to 20 percent of the estimated settlement value.8Annuity.org. Pre-Settlement Funding When the case resolves, your attorney pays the funding company its agreed amount from the settlement before releasing the remainder to you. Lose the case, and you owe nothing.6Oasis Financial. The Role of Your Attorney in Pre-Settlement Funding

Which Cases Qualify

Most personal injury claims where someone else’s negligence caused the harm are eligible. That includes auto and motorcycle accidents, slip-and-falls, medical malpractice, wrongful death, and product liability.5Rockpoint Legal Funding. Ohio Legal Funding Some funders also handle employment disputes, workplace discrimination, civil rights claims, mass torts, and Jones Act cases.9Mustang Funding. Ohio Legal Funding

Workers’ compensation is a gray area in Ohio. Oasis Financial lists Ohio workers’ comp claims as eligible when there’s a legal dispute over benefits; Mustang Funding specifically excludes them.10Oasis Financial. What Personal Injury Cases Qualify for Pre-Settlement Funding9Mustang Funding. Ohio Legal Funding Ask the specific funder before applying.

To qualify at all, you need an active lawsuit or claim, an attorney willing to work with the funder, clear evidence of the other party’s fault, and documented damages such as medical bills or lost wages.7Gain Servicing. Guaranteed Pre-Settlement Funding

What the Contract Must Tell You

Ohio law requires specific disclosures on the front page of every funding contract, printed in at least 12-point bold type: the total dollar amount being advanced, an itemized list of all one-time fees, the total you would owe broken down in six-month intervals over 36 months, and the annual percentage rate of return along with how often it compounds.1Ohio Legislative Service Commission. Ohio Revised Code Section 1349.55 Read that front page carefully before signing. The 36-month breakdown is the clearest window you’ll get into what the advance will actually cost if the case drags on.

The contract must also state in bold that the funding company has no right to make decisions about your lawsuit or any settlement. If it’s missing that language, it doesn’t comply with the statute.1Ohio Legislative Service Commission. Ohio Revised Code Section 1349.55

Your Five-Day Cancellation Window

You have five business days after receiving the funds to cancel the contract with no penalty. To exercise it, return the money by uncashed check or certified mail within that window.1Ohio Legislative Service Commission. Ohio Revised Code Section 1349.55 This is the one easy exit; after it closes, you’re locked into the fee schedule.

Your Attorney’s Role

Your attorney has to sign a written acknowledgment confirming they reviewed the funding contract, that all fees and rates were disclosed, that they work on a contingency basis, and that settlement proceeds will flow through their trust account or an established settlement fund.1Ohio Legislative Service Commission. Ohio Revised Code Section 1349.55 The contract must be written in the language used during oral negotiations, with translations required for languages other than English, French, or Spanish.

What It Really Costs

Cost is the biggest risk. Ohio currently places no cap on fees or interest, and no limit on how long fees can accrue.11Preferred Capital Funding. Ohio Lawsuit Funding Monthly fees commonly fall between 2 and 4 percent, which translates to annual rates of roughly 27 to 60 percent or higher. Many funders compound the interest, so fees build on top of previously charged fees. On a case that stretches out for years, a $10,000 advance can easily double or triple in total cost.12Nolo. Pros and Cons of Lawsuit Loans

The funding company gets paid out of the settlement before you do, and it’s not first in line. Your attorney’s contingency fee (often a third to half of the total) typically comes out first, then litigation expenses and medical liens, then the funder, and finally you. In a case that settles for less than expected, that order can leave you with very little, or nothing.12Nolo. Pros and Cons of Lawsuit Loans

The non-recourse structure can also make it easy to borrow more than you need, because the risk of losing the case feels like it covers you. One industry analysis described this as a “false sense of security.”13Fair Rate Funding. Lawsuit Loan Disadvantages Take only what you actually need to cover the gap until settlement, and run the numbers with your attorney against the 36-month disclosure before signing. The American Bar Association has urged attorneys to monitor these arrangements closely so clients understand the terms.8Annuity.org. Pre-Settlement Funding

A Possible Tax Hit You May Not Expect

The advance itself can be taxable. In Novoselsky v. Commissioner (T.C. Memo. 2020-68), the U.S. Tax Court ruled that litigation advances with repayment contingent on case success are not loans for federal income tax purposes. Because the taxpayer had no absolute obligation to repay, the court treated the advances as taxable ordinary income in the year received.14Mayer Brown. Litigation Finance Update: US Tax Court Refutes Loan Treatment for Upfront Litigation Support Payments in Novoselsky v. Commissioner The IRS has taken the position that litigation funding advances lacking an unconditional repayment obligation are prepaid income to the recipient. Talk to a tax professional before accepting a large advance.

What Could Change Soon: House Bill 105

The Ohio General Assembly has passed House Bill 105, which would substantially rewrite the rules for pre-settlement funding. The bill cleared the Ohio House 73-12 on November 19, 2025, and later cleared the Ohio Senate.15Ohio House of Representatives. Ohio House Passes HB 105 to Bring Transparency and Accountability to Third-Party Litigation Funding2NFIB. Small Businesses Praise Passage of Litigation Financing Transparency Bill As of mid-2026, it’s awaiting Governor DeWine’s signature.

If signed, HB 105 would repeal O.R.C. § 1349.55 and replace it with a new regulatory chapter. The provisions that would most affect consumers:

Until the bill is signed and takes effect, the existing law and its uncapped fees still govern any contract you sign. If you’re weighing an advance now and your case is likely to resolve months out, it’s worth asking your attorney where HB 105 stands before you commit.