What Happens When It’s Time to Disburse Funds?
Much is written about what goes on during a civil lawsuit. Topics such as investigation, litigation and settlement are often examined. But what about what occurs after the case is over? In this post, we examine common issues at the time of lawsuit settlement disbursement in a civil trial.
After the Case is Resolved – The Time of Disbursement
Lawsuit settlement disbursement begins when money is received by plaintiff’s counsel and deposited in their attorney trust account. An attorney trust account is a qualified bank account where attorneys deposit client funds for safekeeping. Also known as a “client funds account” or “lawyer trust account”, there are specific trust accounting guidelines that attorneys must follow.
The lawsuit settlement is then disbursed to all claims against the proceeds. These claims include:
Contingency fee arrangements such as the ones typically used in personal injury lawsuits are usually the first claim against the proceeds. Depending on the state, contingency fee agreements can range from 25% to 40% of the gross settlement proceeds. Other agreements outside the personal injury realm can even be greater.
Attorneys also account for different costs that must be advanced in order to litigate the lawsuit. These can include:
- service of process fees
- retaining expert(s)
- appearance fees for experts
- expert narrative reports
- stenographer fees
- filing fees
- and more. . .
Lawsuit settlement disbursement claims against proceeds can also be made by entities which paid money for your care or maintenance. Common liens made on personal injury settlements can include:
- Workers Compensation benefits – those injured while at work can collect worker’s compensation benefits and still pursue a third party case against the at fault party (tortfeasor). Of course, some or all of those benefits must be repaid at disbursement to prevent what is known as double recovery.
- Private insurance providers – private health insurance or automobile insurance companies may place a lien against the settlement if they cover medical treatments in some states.
- Health care providers – hospitals, clinics and doctors often receive letters of protection prior to service.
- Government Based Providers – Medicaid, Medicare and/or the Veteran’s Administration medical payments may also be subject to an asserted lien. These are priority liens and must be repaid if requested.
Other Claims Payable from Lawsuit Settlement Disbursement
In addition to liens derived from medical treatment or other benefits, additional claims can be made against settlement proceeds. Claims of this nature might include:
- Back Child Support – courts consider past due child support a priority. If plaintiffs are behind on their child support obligations, you can expect the settlement will be encumbered accordingly.
- Tax Liens – governments love taxes and non-payment can lead to dire consequences. Tax liens are a common claim against lawsuit proceeds.
- Lawsuit Loans – plaintiffs sometimes sell a portion of their settlement ahead of time. Because of this, lawsuit loans are a claim against settlement proceeds which must be repaid before plaintiffs receive their share.
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Lawsuit Settlement Disbursement – What to Expect
Actual lawsuit settlement disbursement occurs when the law firm writes checks and sends them to the parties holding a claim on the settlement proceeds. Generally, payment to plaintiffs themselves will be accompanied by a what is known as a disbursement sheet. This lawsuit settlement disbursement letter will outline the accounting involved and itemize all amounts of money allotted to attorney fees and costs, letters of protection, lawsuit funding, taxes, child support, etc. These items are deducted from the total and the remainder is sent to the plaintiff.
The purpose of the lawsuit settlement disbursement letter is to remind the plaintiff of how the settlement was distributed and explain why each claim had to be satisfied. Any questions can then be directed to the law firm for clarification.
Conclusions Regarding Lawsuit Settlement Disbursement
This post endeavored to identify common potential claims against the settlement proceeds of a civil lawsuit. Although each case is different, some types of claims are common. We’ve identified some of these herein.
As always, any questions regarding liens generally and lien priority should be directed to your counsel. Obviously, if you need legal advice, that is where you should look. Nothing herein should be regarded as legal advice to you personally or in general.
Thank you for your interest in what happens at the time of lawsuit settlement disbursement.