Being injured in an accident is scary, especially when the bills start to pile up. However, going after the negligent party responsible for your injuries can result in a settlement to cover those bills. As a personal injury lawyer can share, a settlement grants financial relief to the injured party. Unfortunately, if you have outstanding debts, those will be taken from the settlement before you receive it. These are some of the most common debts you may encounter in your personal injury case:
- Medical Bills: First and foremost, your medical bills must be paid. If you have not been paying for treatment, the amount owed will be subtracted from your settlement. Your attorney will make sure you are aware of this throughout the case. They can help you communicate with the hospital so that they understand you are waiting on your case for more information.
- Insurance Claims: In some cases, your insurance may have been paying for your bills — this might include your hospital bills. If that is true, then they may also take some of the settlement to cover those costs. Your lawyer can help you keep track of this amount so you know exactly how much will be taken at the end.
- Legal Fees: Your legal team will let you know before you start officially working with them how much they will be owed at the end of a case. Some attorneys work off flat rates or fees while others take a percentage of your winnings — most personal injury cases are done based on a percentage. You will sign an agreement with your lawyer acknowledging that at the end of the case you will give them that amount if they win your case.
Other Related Debts
While you may be aware that your medical bills, insurance claims, and legal fees will come out of your final settlement, you might not know that other personal debts may also be taken from a settlement. These debts can include outstanding credit cards or unpaid personal loans. If you are working with a collection agency on paying back owed amounts, be sure to let your lawyer know so they can accurately calculate your settlement; your attorney can also reach out to them on your behalf in order to coordinate how payments work with your ongoing case.
If you are not happy with the amount of debt you feel you are facing from your injury, you can ask your lawyer to help you negotiate with these various parties. Some medical providers and insurance companies are willing to work on the amount owed to them which can then increase the final dollar amount in your own pocket.
If you have any questions on how debts you already owe or have accrued during your personal injury journey might affect your settlement, reach out to a lawyer near you. They will be able to calculate how those debts will affect the final amount you might receive, and they can advise you on the best course of action so that you are compensated for expenses from the incident as well as any lost wages you may have suffered.
FAQ
Can you prevent creditors from obtaining a lien or garnishment on a personal injury settlement?
Many states have exceptions which protect personal injury settlements from being garnished by creditors. However, even in states where those protections exist, you will want to consult a personal injury attorney to ensure your settlement is protected. Source
Are payments for a personal injury settlement taxable?
This isn’t a simple yes or no question. Actual damages resulting from an actual injury (physical or otherwise) are not considered to be income – those monies are compensation for actual damages caused, and generally are not taxable. Emotional distress damages are more of a gray area – if it’s reimbursement for actual medical expenses related to distress, those damages are tax exempt. Punitive damages are almost always considered gross income and therefore taxable. The only exception to this is damages awarded for wrongful death in states where state statue provides only punitive damages in wrongful death claims. You’ll need to consult an attorney and/or accountant to ensure you’re compliant with tax legislation. Source
This post was contributed by our friends at Cohen & Cohen, a D.C.-based firm specializing in personal injury cases, including cases related to debt collection harassment.
