A liability settlement usually starts with one big number. That number is the gross settlement. It is not the amount you will put in your bank account. By the time the money moves through fees, costs, and repayment claims, the check you receive can be much smaller. This is normal.
Most liability lawyers work on a contingency fee. That means you do not pay an hourly rate. Instead, the lawyer takes a percentage of the money recovered. A common fee is one-third, or about 33.3 percent. If the case goes to court, the fee may rise to 40 percent or more. The exact number is in your written fee agreement. Read it before you sign. The fee is usually calculated on the gross settlement, not on what is left after other bills are paid. If your case settles for $100,000 and the fee is one-third, the lawyer’s fee is $33,333. That leaves $66,667 before other deductions.
Then there are case costs. These are not the same as the lawyer’s fee. Costs are the expenses needed to build and pursue the case. They can include filing fees, medical record charges, expert witness fees, deposition costs, investigator bills, copying, postage, and travel. Your lawyer may advance these costs for you. The fee agreement usually says those advances are repaid from the settlement. Depending on the agreement and your state, costs may be taken out before the fee or after. A serious injury case can rack up thousands of dollars in costs. Ask for a running total if you want to know where things stand.
The next deduction is often the biggest surprise: repayment claims. If your health insurance paid for treatment after the accident, the insurer may have a right to be repaid from your settlement. Medicare and Medicaid usually have strong repayment rights. Hospitals may file a lien, which is a legal claim against the settlement money. If workers’ compensation paid benefits, that system may also seek repayment. These claims are often called liens. A lien is simply a demand for payment from the settlement before the money is released to you. It does not disappear because you did not know about it.
Your lawyer should identify these repayment claims early. A good lawyer will contact each insurer, hospital, or government program and ask for a final payoff amount. Many liens can be reduced. Medicare and Medicaid sometimes reduce their claim to account for the lawyer’s fees and costs. Private insurers may negotiate a discount. Hospitals may accept less than the full bill. But no one is guaranteed a reduction. If the lien is larger than the settlement, the case may need a different plan. Sometimes the lawyer can negotiate, sometimes the client may owe the remaining balance, and sometimes the settlement is simply not enough to satisfy everyone.
After the case settles, the money is usually sent to the lawyer’s trust account. A trust account is a bank account for client money. The lawyer must wait for the check to clear before paying anyone. Then the lawyer pays the costs, takes the fee, pays valid liens, and sends the rest to you. You should receive a settlement statement. This statement lists the gross settlement, the lawyer’s fee, the costs, the lien payments, and the net amount to you. Check every line. If you do not understand a charge, ask. You have the right to a clear explanation. Do not sign anything releasing the money until you understand what you are approving.
Timing matters too. A simple settlement with one insurer and no liens may pay within a few weeks. A case with Medicare, Medicaid, hospital liens, multiple plaintiffs, a minor, an estate, or a bankruptcy can take months. Do not spend the money before it is in your hands.
The main point is simple. The settlement amount is gross. Your check is net. The difference is the lawyer’s fee, case costs, and repayment claims. Before you settle, ask your lawyer for a written estimate of what you will actually receive. Ask how the fee is calculated, what costs have been paid, and which liens exist. A settlement is only a good result if you understand what you are getting and what you still owe.
