Commercial litigation finance continues to gain ground in the insolvency space as practitioners become more comfortable with this type of case financing. In an article featured in the April issue of the TMA’s Journal of Corporate Renewal, Bentham IMF's Ken Epstein explains how practitioners and bankruptcy courts are using litigation funding with increasing frequency to help boost creditor recoveries.
Epstein notes, “Seed funding from a debtor may provide sufficient funds to investigate and commence litigation but provide little for the remaining life of the case.” Additional capital is often unavailable or difficult to obtain. Post-confirmation litigation trusts can help by obtaining litigation funding that can provide the estate with critical working capital during the pendency of the case, and the ability to retain a preferred law firm or expert.
Epstein says, “When there is little money in the bankruptcy estate to prosecute causes of action, trustees frequently turn to contingency counsel to provide legal representation in exchange for a portion of settlement or judgment proceeds.” Litigation funding can be a cost-effective alternative to finance an individual case, or for a trust to monetize multiple litigation assets.
Epstein recommends that claimants and practitioners familiarize themselves with the key issues that are likely to arise when litigation funding agreements are used in bankruptcy. He offers several tips to keep in mind, including:
- securing witnesses and records
- synchronizing the trust agreement and plan documents
- getting bankruptcy court approval of funding agreements
- extending the work product privilege to litigation funders
- understanding the role that funders play in funded litigation
- learning about the bankruptcy estate’s prospective litigation funder
Epstein suggests that proper planning and awareness of these key issues will help practitioners use litigation finance to the highest benefit of their clients.
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About Bentham IMF’s Bankruptcy Funding
Bankruptcy funding presents a host of opportunities for bankruptcy estate representatives, litigation trustees and their counsel seeking to maximize the value of litigation claims in a bankruptcy estate or litigation trust for the benefit of creditors and other stakeholders.
In Chapter 7 and 11, Bentham’s bankruptcy funding is available for use in avoidance actions; claims held by estates, such as commercial and IP litigation, breach of fiduciary duty cases, theft of corporate opportunities matters, equitable subordination claims and tax refund claims; financing estate or trust expenses, such as pre-plan litigation and pre-confirmation investigations; and monetizing judgments to pay expenses, fund distributions or pursue additional claims.
Our funding solutions enable bankruptcy estate representatives and litigation trustees to access high-quality counsel and experts while reducing risk to creditors. These solutions include capital for pre-litigation and pre-confirmation investigations, working capital, fees and costs funding and capital to monetize appeals.
We also help law firms working in the bankruptcy arena share risk with clients, positioning them to win more engagements and increase revenues and profits via full or reduced hourly fee funding, risk sharing in single cases, and risk sharing in portfolios of cases.
To learn more about how Bentham can help bankruptcy professionals maximize recoveries to their clients, download our bankruptcy funding brochure or contact us.