A Lawyer’s Duties When a Client Seeks Financial Assistance

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Lawyers are not required to make any personal loans or advances to the client(s), and may, in some states or jurisdictions actually be prohibited by laws or ethical rules from doing so. However, where not prohibited by applicable law or ethical rules, the attorneys may, in their sole and absolute discretion, make reasonable loans or advances to a client(s) upon request and unless a separate written agreement is reached between the attorneys and the client(s), any such loans or advances shall be repaid to the attorneys, together with interest or the cost of credit thereon actually incurred and paid by the attorneys, from any recoveries made.

Lawyers often face questions about whether and how they may financially assist a client while a client’s case is pending or contemplated. These questions may involve: (1) whether a lawyer may loan a client money for living expenses during the representation; (2) whether a lawyer may borrow money from a bank to advance litigation expenses on behalf of a client; and (3) whether a lawyer may refer a client to a third-party financing company to obtain financial assistance to cover living expenses or the lawyer’s fees and litigation expenses.

The circumstances that give rise to the question are usually compelling. For example, in contingency fee matters, a client may have a strong case resulting from an accident in which the client was seriously injured. The client, however, may be behind on their bills and in financial distress because of the injuries. Without financial assistance, the client may feel pressured to settle for short money, and the lawyer may be inclined to loan the client money with the expectation that the lawyer will be paid back out of the judgment. Similarly, a client experiencing financial distress may seek an advance from a lawyer after the case has settled but issuance of the insurer’s check is temporarily delayed.