6 Steps From Settlement to Final Disbursement
Almost all personal injury cases settle before or during trial, and when settlement is reached, you’ll want to know to expect next. Although the steps from settlement to disbursement might vary slightly depending on the circumstances of the case, here is how it usually goes:
1. Settlement Paperwork
When your Colorado personal injury case settles, your attorney will assist you with all the related paperwork, including a release from the liability insurance company that must be signed to officially settle the claim. In signing the release, you will give up all rights to bring a lawsuit against the entity responsible for your injuries and the insurance company will then release the check for the agreed-upon settlement amount to you and your attorney. The check will be sent to your attorney, and will typically be placed in the law firm’s trust account pending finalization of the case.
2. Fees and Costs
Before you get your settlement check, expenses such as your attorney’s fees and court costs will be deducted from your award. Your attorney’s fee will correspond to the agreed-upon percentage detailed in the retainer agreement you both signed when he agreed to represent you. For personal injury attorneys who work on a contingency basis, this fee is usually one-third of the settlement but may be more if the case was filed in court or goes to trial, even if it was settled before the trial ended.
3. Accident-Related Medical Bills
Even if you have health insurance and medical pay coverage on your auto insurance policy, you may still have some accident-related medical expenses outstanding, or you may need to reimburse an insurance company that paid medical bills on your behalf. Most Colorado personal injury attorneys will take care of this for you, to save you the trouble of having to pay them all yourself, to ensure that the providers release you from any further obligation regarding your accident-related medical bills, and also to ensure that your providers are paid, particularly if they held your bills for an extended period of time at your attorney’s request.
4. Potential Discounts
If your settlement isn’t large enough to cover all your bills and still leave you with at least a modest recovery, your attorney will sometimes work to negotiate some sort of discount from your providers and ask them to waive any interest that may have accrued on your accounts. Although clients would typically have difficulty negotiating such a discount, most providers will agree to an attorney’s terms, provided he has built a reputation for fair dealings with them in the past.
5. Taxable or Not?
Personal injury settlements to reimburse individuals for physical injuries or illnesses are usually not considered to be taxable income, as they are intended to help make the plaintiff “whole again.” However, if you previously claimed a medical expense deduction related to the injury on your income tax, you’ll have to report the settlement as “other income” on your tax return, according to the Internal Revenue Service.
6. Final Disbursement
The moment you’ve been waiting for is finally here — final disbursement, at which time you’ll meet with your attorney to receive your settlement check, along with copies of all other checks and releases, a breakdown of the costs pertaining to your case, and a settlement statement, which will provide a detailed summary of where the money went.