A major consideration in reaching a personal injury settlement is the existence of liens on the settlement funds. A lien is simply a rightful claim against property—in this case, your settlement check.
A variety of companies or entities may hold a lien against your settlement funds, including Medicare, doctors’ offices, chiropractors, and even your own insurance company (if they paid some of your medical bills related to the case). All of these liens and debts must be addressed and taken into account when reaching your final settlement.
Your personal injury attorney will have a discussion with you about your bills, leading up to the settlement negotiation. Typically, your attorney will be negotiating on your behalf with the insurance company while simultaneously negotiating with individuals who are owed out of your settlement. To the extent the attorney convinces those providers to take less than they are owed, it puts more money in your pocket. Due to the ongoing nature of the relationship between a personal injury attorney and a medical provider like a doctor or chiropractor, the attorney is usually successful at getting your bill reduced significantly.
Lastly, while not technically a ‘lien’ at settlement stage, your settlement may give rise to a tax obligation. To the extent that your settlement represents lost wages, you’ll need to speak with an accountant about how to declare those funds come tax time. Additionally, if you previously took a tax deduction for medical expenses on a prior year return, and then were later reimbursed for those medical expenses when you settled, you may have a duty to disclose that to the IRS on your next return.
Prior to reaching a final settlement agreement, your personal injury attorney should be able to show you your total bills, the negotiated amounts, and the net amount that will end up in your pocket. If you have questions about a personal injury settlement please call 704.749.7747 and we will be happy to help you understand the process. We’re here to help.