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The process of pursuing a contingency fee lawsuit can be a long one. Settling the case before going to trial can be a very exciting step, however, it’s important to remember that it’s not the end. It’s not a simple payment of money, but the ending of a legal obligation. There are a number of steps that must take place before any of the funds can be disbursed.
The first step in the disbursement process is having both sides agree upon terms to resolve the lawsuit. Once both sides agree, a settlement agreement is drafted. These agreements outline the timeframe and amount that has to be paid. Generally, there are two main types of payment: a lump sum or a payment plan. If the agreement states the money will be paid in a lump sum, the defendants normally will have 30 or 60 days to pay the money. If both sides agree to a payment plan, the timeframe will be outlined in the settlement agreement or mediator’s proposal. Once both sides have signed the agreement, the lawsuit is typically dismissed.
Once the final agreement has been signed and the attorney has received the settlement, the process of disbursement can begin. The funds are placed into a trust account so that all costs, fees, and liens can be paid. Normally it takes a few days for the check to clear the bank and be available in the trust account. Once the funds become available, the following steps happen:
Attorney’s fees. The first expense that is deducted is the attorney’s fees. They are a percentage of the total amount recovered. It is important to remember that the attorney’s fees are deducted before any other expenses are taken out of the settlement including bills, liens, expert fees, etc. This process is generally explained in the engagement agreement and the initial signup meeting.
Case expenses. When the attorney agreed to take the case on a contingency fee basis, they agreed to advance any expenses or costs that may be incurred while pursuing the case and then be reimbursed if they were successful in getting compensation for the client. Any case expenses will be paid back to the attorney from the remaining settlement funds (not from the attorney’s fees). These may include ordering medical bills, hiring an expert, paying for a deposition, or any travel expenses.
Any known medical bills or liens. The attorney will pay any bills or liens that they are aware of from the settlement funds before disbursing any money to the client. These may come from Medicare, Medicaid, an insurance company or a medical provider. It is always best practice to give any invoices or notices of liens that you receive to your attorney as soon as you receive them. Normally, the attorney will try to negotiate with the medical providers or insurance companies to get the bills or liens lowered and this process can take some time. Providing any bills or liens as soon as you receive them can help expedite the process.
The remaining money is given to the client. After all the expenses, fees, and liens have been paid, the client will receive the remaining settlement funds. Typically, a settlement statement will be prepared and signed before the money is disbursed.
While the above is the general process for disbursing settlement funds, there are a few things that may affect how quickly the final settlement check may be disbursed. Below are some of the most common variables that may affect the process and timeframe:
If the lawsuit involves a minor. Settlements involving minors are handled differently than those for adults. For example, settlement funds may be used to purchase an annuity that will invest the money until the minor reaches a certain age, and then pay benefits when the child becomes an adult.
Lien finalization. If there is a lien from Medicare or Medicaid, it must be satisfied before any of the funds can be dispersed. Sometimes it can take Medicare or Medicaid some time to finalize the lien amount. While the attorney can follow up on the lien finalization, it is something that is ultimately out of their hands.
Defendant is slow to pay. If there are logistical difficulties on the defendant’s end on processing the payment, that can slow down the process. For example, if the check is not able to be deposited and has to be reissued, this will slow down the process.
Probate issues. In cases where an injured client has died, the probate process must be completed prior to the disbursement of the settlement. The probate process has a lot of different steps and each and every one has to be completed before any money from the settlement can be disbursed.
It is important to remember that each and every case is different. While there is a general process for disbursement that most lawsuits will follow, the exact process will differ for each case. However, having an understanding of the general disbursement process can help manage expectations for when the final funds will be disbursed.