Dont give up fighting just yet. The funding bodies often refuse funding first time round to try and save money but if you appeal with a good case behind you then they will find justifying you funding a second time round very difficult. If they think that you have given up then they will find little reason to help you (sad but true) so dont give up, keep going and take all the support you can get right now.
And yes, you have the right to a free advocate to help you put your case together and/or present it to the appropriate people. Also they will attend meetings with you if you wish and make sure youre not taken advantage of by the authorities.
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