A common question we receive is, “How are personal injury settlements paid out?” A misconception about injury settlements is that you get your settlement check as soon as you reach an agreement. There is a process after the negotiations before you receive compensation and your claim is closed. Below, our Los Angeles personal injury attorneys explain what happens after you reach a settlement and how settlements are paid out.
What Happens After You Reach a Settlement Agreement With the At-Fault Party?
Once you reach a settlement agreement with the at-fault party’s insurance company, you can expect the following.
#1: The Injured Party Will Execute A Release
After both parties reach a settlement amount, your attorney and the at-fault party’s insurance company and/or attorneys will negotiate the settlement terms and release. Then, you will sign a settlement release form. A settlement release form confirms that you waive your right to any further claims concerning the accident in return for the settlement funds. It releases the liable party from future damages and liability.
#2: The Insurance Company Will Send Your Attorney a Settlement Check
The insurance company will send your settlement check directly to your attorney. Your attorney will deposit your check into a Client Trust Account known as an Interest on Lawyers’ Trust Account (IOLTA). These accounts are reserved solely for settlement funds. The settlement funds will remain until the resolution of any liens against your settlement.
#3: Liens to Resolve
Before you can get your settlement award, you must resolve any liens from third parties. A lien is a third party’s legal right to take proceeds from your injury claim for the debt you owe.
For example, a medical lien is one of the most common liens in a personal injury case. Suppose a healthcare provider, health insurance company, or other party paid for any of your upfront medical costs. In that case, it may put a lien against your settlement to get reimbursed for your medical expenses.
#4: Your Attorney Will Distribute Your Compensation to You
Once you resolve any liens, your law firm will take its fees and costs before sending you a check with the final settlement amount. The final amount will reflect your settlement reduced by all the resolved liens and fees. It will mark the resolution of your injury case.
Discuss Your Personal Injury Settlement With Steers & Associates
Have you been injured in an accident and plan to pursue legal action? Discuss your situation with an experienced attorney. Steers & Associates handles many personal injury cases, including car and Lyft accidents across Los Angeles and California. We can help you understand your best legal options and how we may be able to help you. We can represent you through the entire legal and settlement process if you have a viable claim.
When Will You Receive Your Settlement Check?
There is no definite answer as to when you will receive your settlement check. Each case is different. However, you can likely expect to receive it within a few weeks to one month.
Costs That Reduce Your Personal Injury Settlement Amount
When you are injured in an accident, you may be entitled to financial compensation from the liable party. However, several factors can reduce the amount of your settlement.
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Medical liens are among the highest costs that may reduce your injury settlement. Many individuals and families cannot pay upfront for extensive medical bills after an accident. It is common for medical providers to pay for your medical expenses upfront in exchange for a lien on your personal injury claim. Once you settle any medical or health insurance liens, these third parties get reimbursed.
Attorney’s Fees and Additional Legal Expenses
Most personal injury lawyers work on a contingency fee basis. A contingency fee basis means the law firm covers the upfront costs of pursuing the claim and only gets paid if it recovers compensation on your behalf. There are no upfront legal fees or risks involved in pursuing a claim. A contingency fee structure makes litigation a viable option for anyone who needs it.
When you reach a settlement, your attorney will get a percentage of the settlement amount to compensate your legal team for the work it has done for you. You should have signed a fee agreement at the time of hire that explains your attorney’s fees if you lose your personal injury case.
Additional Legal Expenses
Your law firm will also get reimbursed for the costs of the case. These are costs that your law firm paid to file and handle your claim. A few common legal expenses may include fees for obtaining copies of medical records and medical bills, court filing fees, and accident investigation fees.
Lump Sum vs. Structured Settlement
If you obtain an injury award or judgment for your traumatic injury claim, you may wonder, “How are personal injury settlements paid out?” Additionally, you may be unsure of the best way to receive your money. Should you take a lump sum or opt for a structured settlement? Each option has advantages and disadvantages. The best choice for you will ultimately depend on your circumstances.
Lump Sum Payout
With a lump sum, you receive your settlement in a one-time payment. It is typically the best option if you want or need the money immediately or plan to invest it and grow your earnings.
However, a lump sum may be less than the total value of the settlement when spread out over time, and there is always the risk that you will lose money if you invest it poorly. Additionally, it requires a level of financial discipline that not everyone can maintain.
You may choose a structured settlement if the settlement amount is substantial. A structured settlement pays the injured party in periodic payments. It ensures that you will receive a steady income stream over time.
Periodic payments can provide peace of mind and allow you to budget more easily. However, a structured settlement may not be right for you if you need money.
Personal Injury Settlement Taxes
California and the Internal Revenue Service (IRS) may or may not impose taxes on a portion of your personal injury settlement in the tax year that you received the award. The portion of the settlement that is compensation for your injuries is not considered taxable income. However, financial compensation for lost wages is subject to taxation. We recommend talking to a tax professional during tax season to ensure you comply with California and federal tax laws regarding your settlement.
Can You Reopen a Personal Injury Claim Once It Has Settled?
If you have recently settled your personal injury claim, you may wonder if it is possible to reopen the case. In most cases, you cannot reopen a claim after settling it and signing a release. Before receiving the money, you signed a release form, waiving your right to pursue any other claims related to the accident and officially closing your claim.
How to Calculate Personal Injury Settlement Demands
The average personal injury settlement amounts in California are calculated based on many factors and circumstances, including medical costs, lost wages, and injury severity. The first step is to determine your monetary damages. Then, you need to calculate non-monetary damages, which are much more difficult to quantify. Non-monetary damages may consist of pain and suffering, emotional distress, and loss of enjoyment of life.
We recommend working with an experienced personal injury lawyer who can evaluate the circumstances of your case. Your attorney can give you a better idea of your case’s worth.
Contact Our Los Angeles Personal Injury Attorneys Today
Have you suffered an injury after an accident? Discuss your potential personal injury case with our Los Angeles personal injury lawyers. We have recovered millions of dollars on behalf of our clients, you can check our case results for proof. Schedule a free consultation to discuss how we may be able to help you too.
Call us at (800) 824-5416) or fill out our online contact form. We provide phone consultations, video conferencing, and in-office visits. We have offices across Southern California, including Los Angeles, Sherman Oaks, Lancaster, and Long Beach.
Allen Vaysberg practices personal injury law and works tirelessly to defeat the tactics of insurance companies and large corporations who try to deny justice and fair compensation to injured people.