A personal injury settlement is simply the monetary compensation for a loss you may have incurred in an accident; it may not be the exact amount you will walk away with. There are multiple deductions to account for in determining the total amount of your settlement: attorney’s fees, medical bills, and other liens against your settlement. Identifying what the standard deductions are in advance will give you some clarity on how much of a settlement you can expect in your pocket.

Attorney’s Fees

Most personal injury attorneys work on a contingency fee basis, meaning they only get paid if you receive compensation. A settlement breakdown example often shows the attorney’s fee as a percentage of the recovery, usually between 30% and 40%. This arrangement is typically outlined in a written agreement before you hire counsel. The percentage may also vary depending on whether your case resolves before litigation or proceeds through a trial, ensuring transparency about how funds are distributed.

Litigation Cost

There are costs associated with filing fees, expert fees, court reporter fees, costs associated with obtaining a copy of your medical records, costs associated with obtaining police reports, and costs related to credentialed documents when preparing your case. Certain law firms will pay these costs out of their operating expenses at the outset, then include them in your settlement after the case has ended. These costs are usually less than the standard attorney’s fees, but can still add up to be a sizable amount deducted from your settlement.

Medical Bills and Hospital Liens

The most significant item deduction that you will probably get is any outstanding medical expenses. Suppose you are undergoing treatment for your accident injuries. In that case, your hospital or medical providers may have placed a lien on your settlement to make sure they get paid directly before you get to the rest. This line can happen not only with hospitals, but also with physical therapists, surgeons, and other specialists who treat your accident injuries. Not meeting those liens would mean your settlement is already going to be cut, so we deal with those first.

Health Insurance Reimbursements

Suppose your health insurance carrier paid for medical expenses caused by the accident. In that case, they may have a right to reimbursement through a principle called subrogation, which means your carrier can seek repayment from your settlement to cover what the airline paid for. This applies to not only private insurance carriers but also government programs, like Medicaid and Medicare, that have different policies for reimbursement. 

Workers’ Compensation Liens

Suppose your accident and injury happened at work, and your employer has workers’ compensation insurance. In that case, they may have already paid for a portion of your treatment or to replace your wages. The state law would regulate the amount required to be reimbursed on your settlement, but this is a deduction that routinely happens when work-related claims and third-party claims collide.

Child Support Arrears

Personal injury settlements are considered financial assets, and the court can order that, for unpaid child support, a portion of the settlement must be deducted. State agencies may be monitoring your settlement and if there is a claimant with unpaid child support, the state can order child support to be paid from any unpaid settlement before the claimant or plaintiff gets paid their funds. The rationale is that these support obligations will always take precedence over a person’s recovery and rehabilitation.

Key Takeaways

• Attorney’s fees and litigation expenses are the most common deductions.
• Most unpaid medical bills and insurance reimbursements are paid directly from the settlement.
• Government program paybacks like Medicare or Medicaid require strict compliance with the payback process.
• Workers’ compensation liens and child support arrears also take from your final payout.