Many people do not understand how a personal injury settlement works. After months of hard work, negotiations, and potentially a trial, you may have finally received a significant settlement in your personal injury lawsuit, perhaps even a seven-figure amount. But what happens next? How is that money divided between you and your attorney? What does a contingency fee agreement really mean? And how can you determine the final amount you will recover?
In this blog post, we will walk you through the process of what happens after your case is monetized, meaning after a settlement is reached or a jury renders a verdict. Here is a breakdown of how payment works at the end of a personal injury lawsuit.
What is a Contingency Fee Agreement?
First, let us discuss contingency fee agreements, which are standard in personal injury cases. Under this agreement, your attorney only gets paid if they recover money for you. This means you will not be paying them hourly; if no money is recovered, you do not owe them anything. This structure is designed to ensure that attorneys are motivated to win your case.
How Are Deductions Made from a Personal Injury Settlement?
Once you have a personal injury settlement or judgment, several deductions will occur before you receive your final payout. Here are the primary deductions you should be aware of:
- Attorney’s Fees: In Texas, attorneys typically receive around 40% of the recovery made by the client. For example, if your recovery is $1 million, your attorney would receive $400,000 off the top. This fee is justified by the work and time the attorney invested in your case, often without any guarantee of recovery.
- Expenses: Your attorney may have incurred various expenses while working on your case. This can include costs for hiring experts, conducting depositions, and other necessary expenditures to prove your case. These expenses will be deducted from your portion of the settlement.
- Medical Liens: If you sought medical treatment related to your injuries, medical providers may have filed liens against your settlement. This means they are entitled to recoup the costs associated with your medical care from your settlement amount.
Example Breakdown
Let us break this down with an example of a personal injury settlement. Suppose you recover $1 million from your lawsuit with a 40% contingency fee agreement. Here is how the deductions would look:
- Attorney’s Fees: $1,000,000 x 40% = $400,000
- Remaining Amount: $1,000,000 – $400,000 = $600,000
Next, let us say your attorney advanced $75,000 in expenses:
- Expenses Deduction: $600,000 – $75,000 = $525,000
Finally, if your medical providers have liens totaling $100,000:
- Medical Liens Deduction: $525,000 – $100,000 = $425,000
At the end of this process, you would receive $425,000 from your original $1 million recovery. While this amount may seem significantly less than the total recovery, understanding how these deductions work is crucial for managing your expectations.
Contact Allen & Nunnally for Help with Your Personal Injury Case
Understanding the financial breakdown of your personal injury settlement is essential. It may not be a pretty process, but it is vital for you as a client to know how your payment will be divided and what you can expect to receive at the end of your case.
At Allen & Nunnally, we pride ourselves on transparency and ensuring that our clients are fully informed about the costs associated with their cases. If you have been injured and need assistance, remember that we are here to fight for your rights and ensure that you have the support you need. You’ll have no better friend than us, and those who have caused your injuries will have no worse enemy.
For more information or to discuss your personal injury case, feel free to reach out to us today.