When a personal injury case settles, the money usually does not go directly from the insurance company to the injured person. Before a client receives their final payment, several important steps may need to happen first. The amounts to be paid to each party must be validated, and legally required payments like medical loans or court fees have to be paid first. For many injury victims, this part of the process can be very confusing.
This guide explains what typically happens to settlement money after a personal injury case in Texas.
On This Page
- What Happens After You Accept a Settlement?
- Where Does the Settlement Check Go First?
- Why Lawyers Use Trust Accounts for Settlement Money
- What Gets Deducted From a Personal Injury Settlement?
- Why Medical Liens Matter After a Settlement
- What if Medicare Paid Some of the Medical Bills?
- How Comparative Fault Can Affect Settlement Money in Texas
- What Happens if a Minor Receives Settlement Money?
- Are Personal Injury Settlements Taxable?
- How Long Does It Take To Receive Settlement Money?
- What Is a Settlement Statement?
- Hire a Houston Personal Injury Lawyer Today
What Happens After You Accept a Settlement?
After a settlement, the money is released from the insurance company to the client’s attorney. This process usually looks like the following:
- The parties confirm the settlement terms.
- The insurance company or defendant prepares release documents.
- The injured person signs the settlement release.
- The insurance company issues the settlement check.
- The attorney deposits the money into a client trust account.
- The check clears.
- Attorney fees, case expenses, medical bills, liens, or reimbursement claims are reviewed.
- The client receives a final settlement statement.
- The remaining funds are paid to the client.
Where Does the Settlement Check Go First?
In many personal injury cases, the settlement check is sent to the injured person’s attorney, not directly to the client. This is common practice because the attorney must make sure all required payments are handled before distributing the remaining money.
The check may be made payable to the client, the law firm, or both. Once received, the settlement funds are usually deposited into a client trust account. A trust account is separate from the law firm’s operating account. It is used to hold client money safely until the funds are ready to be distributed.
This step protects the client, the attorney, and any third parties with valid claims against the settlement, such as medical providers, health insurers, Medicare, Medicaid, or other lienholders.
Why Lawyers Use Trust Accounts for Settlement Money
A lawyer does not simply deposit settlement money into a regular business account and decide what to pay later. Settlement funds are client funds. They must be handled carefully.
Trust accounts give the law firm time to:
- Confirm the check has cleared
- Review the fee agreement
- Calculate case expenses
- Identify unpaid accident-related medical bills
- Verify liens or reimbursement claims
- Negotiate medical balances when possible
- Prepare a final settlement statement
- Distribute the client’s net recovery
This process can feel frustrating when a client has already waited months or years for a settlement. However, it is often necessary to prevent future problems. If a valid lien or reimbursement claim is ignored, the client could later face collection efforts or demands for repayment.
What Gets Deducted From a Personal Injury Settlement?
The exact deductions depend on the case. In many personal injury settlements, the main deductions are attorney fees, case expenses, medical bills, and liens.
Attorney Fees
Many personal injury law firms use contingency fees, including our office. This means the client does not pay attorney fees upfront. Instead, the attorney receives an agreed percentage of the settlement or verdict if money is recovered. For more information on contingency fees and why we use them, read our article here. Other firms may use an hourly or monthly cost-basis.
The percentage should be explained in the written fee agreement. Before settlement funds are distributed, the attorney’s fee is deducted according to that agreement.
Case Expenses
Case expenses are different from attorney fees. They may include costs paid to investigate, prepare, and pursue the case.
These fees often include:
- Medical record fees
- Police report fees
- Filing fees
- Service of process fees
- Deposition costs
- Expert witness fees
- Accident reconstruction costs
- Records retrieval expenses
- Mediation fees
Some cases have very few expenses. However, catastrophic injury cases require evidence to prove the seriousness of the client’s injury.
Medical Bills
Medical bills are often paid or resolved from the settlement. This may include emergency room bills, hospital bills, ambulance charges, surgery bills, specialist visits, physical therapy, imaging, pain management, or other treatment related to the accident.
In some cases, medical providers wait to be paid until the case settles. In other cases, health insurance may pay some bills and later seek reimbursement from the settlement.
Medical Liens and Reimbursement Claims
A lien is a legal claim against settlement funds. In Texas, hospitals may have lien rights in certain accident cases, according to Texas Property Code Chapter 55. addresses hospital and emergency medical services liens, including liens connected to accident-related treatment.
Other reimbursement claims may come from:
- Health insurance companies
- Medicare
- Medicaid
- Workers’ compensation carriers
- Hospital lienholders
- Medical funding companies
- Child support enforcement
- Other government benefit programs
These claims can significantly affect the amount a client receives.
Why Medical Liens Matter After a Settlement
Medical liens are one of the biggest reasons settlement money may take longer to distribute.
A client may think: “The case settled. Why can’t I receive my money today?”
The answer is often that the law firm is still working to confirm, dispute, reduce, or resolve medical liens. If a hospital, insurer, or government program claims part of the settlement, the attorney may need to determine whether the claim is valid, whether the amount is accurate, and whether it can be reduced.
This matters because liens can reduce the client’s final recovery. A strong personal injury lawyer does not only fight for the gross settlement amount. The lawyer may also work to protect the client’s net recovery by reviewing medical charges, negotiating reductions, and making sure invalid or unrelated charges are not paid from the settlement.
What if Medicare Paid Some of the Medical Bills?
If Medicare paid medical bills related to the accident, Medicare may have a right to be repaid from the settlement. Medicare may make “conditional payments” when another payer may be responsible, and those payments generally must be repaid when there is a settlement, judgment, award, or other payment.
This can delay settlement distribution because the final Medicare repayment amount must be requested, reviewed, and resolved. In some cases, the attorney may need to dispute unrelated charges or make sure Medicare is only seeking repayment for treatment connected to the accident.
How Comparative Fault Can Affect Settlement Money in Texas
Texas follows a proportionate responsibility system. Under Texas Civil Practice and Remedies Code § 33.001, a claimant may not recover damages if their percentage of responsibility is greater than 50 percent.
In practical terms, fault can affect settlement value. If an insurance company argues that the injured person was partly responsible for the accident, the settlement may be reduced. For example, if a person is found 20 percent responsible, the recovery may be reduced to account for that share of fault.
This issue is often important in car accidents, truck accidents, pedestrian accidents, motorcycle accidents, workplace injury cases involving third parties, and other contested injury claims.
What Happens if a Minor Receives Settlement Money?
Courts often review minor settlements to make sure the agreement protects the child’s interests. In Harris County district court cases, the court registry handles funds for minors that are awarded in district court cases, and those funds may be held until the child turns 18 or until further court order.
This means parents may not simply receive and spend a child’s settlement money. Depending on the case, the money may be placed into the court registry, a restricted account, an annuity, or another court-approved arrangement.
This process helps make sure the money is preserved for the injured child.
Are Personal Injury Settlements Taxable?
Many personal injury settlements for physical injuries or physical sickness are not taxable under federal tax guidance, but there are exceptions. IRS Publication 4345 explains that if a settlement is for physical injuries or physical sickness and the injured person did not take an itemized deduction for related medical expenses in prior years, the full amount is generally non-taxable. However, interest and punitive damages can be taxable.
Settlements that include the following could be taxable:
- Punitive damages
- Interest
- Emotional distress not tied to a physical injury
- Wage claims
- Business income losses
- Previously deducted medical expenses
- Confidentiality or non-injury settlement terms
A personal injury lawyer can explain how the settlement is structured, but clients should speak with a qualified tax professional about tax reporting.
How Long Does It Take To Receive Settlement Money?
There is no single timeline for every personal injury case. Some clients receive their funds within a few weeks after the settlement paperwork is complete. Other cases take longer because they have have a number of medical loans, reimbursements and so on. However, if the money comes as the result of a jury verdict, it can take even longer to receive funds due to the appeals process.
Delays do not always mean something is wrong. Often, it means the law firm is making sure the distribution is accurate and legally protected.
In the worst case scenario, the company being sued can declare bankruptcy, making it extremely difficult to recover compensation.
What Is a Settlement Statement?
A settlement statement is a document that shows how the settlement money is distributed.
It usually includes:
- The gross settlement amount
- Attorney fees
- Case expenses
- Medical bills
- Liens or reimbursement claims
- Reductions or negotiated balances
- The final amount paid to the client
Clients should review their settlement statement carefully. It should help answer the most important question: “Where did the settlement money go?”
Hire a Houston Personal Injury Lawyer Today
If you or someone you love have been injured in a personal injury accident, you need to contact an experienced personal injury lawyer in Houston today. Knowing how to fight a personal injury case can mean the difference between a lifetime of medical debt and being able to move forward with your life.
The Law Offices of Hilda Sibrian helps injury victims across Houston and Texas understand every step of the personal injury process, from the first call to the final settlement. Hilda Sibrian has represented clients for over 22 years in cases related to car accidents, truck accidents, workplace accidents, industrial incidents, refinery accidents, and wrongful death claims.
Call Hilda Sibrian today for a free consultation. You pay no upfront attorney fees, and we only get paid if we recover compensation for you. Call our office or fill out our online contact form today.
