Don't Spend A Settlement Before You Receive It, Lest You End Up In Debt

If you've been hurt in a car accident and are expecting a settlement, it may be tempting to take out a loan and make a large purchase. You could buy a new car or go on a vacation now, and pay off the debt when you receive your settlement. It's never a good idea to spend a settlement before you receive it, though. First, you could lose your case. Second, even if you do receive a settlement, it might not be as large as you're anticipating. You should, therefore, wait until you have your settlement before you spend it.

Auto-Related Personal Injury Settlements Aren't Huge

Although multi-million dollar settlements grab headlines, few automobile personal injury claims reach even $100,000. According to The Law Dictionary, the auto-related personal injury claim settlements averaged $24,000 in 2013. If you have a debilitating injury that will impact the rest of our life, you might have a case for a large claim. Few people, however, are awarded huge settlements. Yours is more likely to be around $24,000.

Expenses Reduce What You'll Receive

Several expenses will be deducted from your settlement amount, which will significantly reduce what you'll actually receive. Before you are given anything, the following costs will be paid out of your settlement:

  • court costs, such as depositions, which can range from $364 to $412.75 per page according to O'Brien & Balls, and expert medical witnesses, which Seak says average $555 per hour
  • your personal injury attorney's fees, which AllLaw places at 33 to 40 percent, depending on whether your case goes to trial
  • all of your medical bills, which could total thousands of dollars

Your personal injury attorney is legally obligated to pay your medical bills from your settlement. While it's unwise to use potential settlement money to go on vacation, personal injury attorneys regularly send medical providers letters of protection that guarantee payment for the providers' services upon settling your case. These letters, which let you seek medical care before your case is settled, are legal documents. If your personal injury attorney failed to honor them, your lawyer could face lawsuits and disciplinary action from their state's bar.

To see how much these costs could reduce your settlement, assume the following:

  • you received a typical settlement of $24,000
  • your case required a two-page deposition and two hours of testimony from an expert medical witness
  • your case went to trial
  • your medical bills totalled $4,000

From the $24,000, you would receive $9,297. First, $1,838 would be used to pay the court fees for the deposition and expert medical witness. From the remaining balance, your lawyer would take 40 percent, or $8,865, because the case went to trial. Finally, your medical payments would reduce the remaining balance by $4,000.

A settlement of $9,297 after your medical bills are paid is significant, but it's not going to make you independently wealthy. With this settlement, you could purchase a car, go on a vacation or even remodel a room in your home. If you did any of these things before receiving your settlement, however, it'd be easy to spend more than this amount. In this example, if you didn't wait for your settlement, you'd be stuck paying off any loan you had taken out that was for more than $9,297.

Waiting for a settlement check may try your patience, especially if you have a strong case and a confident personal injury attorney. By delaying any use of settlement funds until you have them in hand, however, you'll be able to use your settlement wisely, without going into debt. Once you receive the funds, you can spend or invest them as you wish.

For more information on this topic, contact an auto accident lawyer in person or online at a site like

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