Insolvency litigators turn to third-party funding

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Sep 05, 2017
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Insolvency cases are no longer exempt from cuts to legal aid

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More than 90 per cent of insolvency litigation specialists consider using third-party funders in their actions, research published yesterday revealed.

But despite the increased enthusiasm for third-party funding, specialists reported that the removal of insolvency from exemptions to legal aid cuts in April last year had decreased the amount of money being recovered for creditors.

Until 18 months ago, insolvency cases had been exempt from the cuts imposed by the Legal Aid, Sentencing and Punishment of Offenders Act 2012.

According to the survey, while 93 per cent of insolvency specialists said they would now consider third-party funding to fill the gap, 75 per cent said that the removal of the exemption had significantly hit amounts recovered.

Maurice Power, the director of Ferguson Litigation Funding, the company that commissioned the survey of 500 insolvency practitioners, said the “worrying aspect” of the results was that creditors were receiving less money after the 2012 act and that “many are slow to adopt or are fully aware of the alternative means of funding litigation”.

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