When you finally settle your personal injury case, you might be eagerly anticipating the arrival of your settlement check. However, you may be surprised to learn that your lawyer can hold your settlement check for some time before releasing the funds. This common practice is known as having the funds in escrow, ensuring that all necessary obligations are met before the money is disbursed.
It’s important to understand that the process of holding the funds in escrow is intended to protect all parties involved in the settlement. In many cases, your lawyer will hold the settlement check until any outstanding medical bills, legal fees, or other related expenses have been paid. This helps prevent any potential issues that may arise if these obligations are left unpaid.
While it can be frustrating to wait for your settlement funds, it’s crucial to recognize that holding the funds in escrow is a standard practice designed to safeguard your interests and ensure that all financial responsibilities are addressed before you receive the remaining amount. This cautious approach also helps prevent any unforeseen complications that could arise if the funds were released prematurely.
Factors That Determine the Length of Time Your Lawyer Can Hold Your Settlement Check
There are several factors that can influence how long your lawyer might hold onto your settlement check. Understanding these factors can help manage your expectations and provide clarity on the legal and administrative processes involved.
Processing and Clearing the Settlement Check
The first factor that determines how long your lawyer can hold your settlement check is the time required for the defendant or insurance company to issue the check. Once the settlement agreement is finalized, the responsible party typically has a set period, usually around 30 days, to send the check to your lawyer.
After receiving the check, your lawyer must deposit it into their escrow or trust account. The time needed for the check to clear can vary depending on the bank and the size of the settlement. In our experience, this process usually takes between 5-7 business days for larger settlements.
Client Trust Accounts and Prompt Notification
Lawyers are required to deposit settlement funds into a Client Trust Account (CTA) or an Interest on Lawyers Trust Account (IOLTA). These accounts are separate from the lawyer’s personal or business accounts and are used to hold client funds safely until they can be disbursed. According to rules set by many state bars, such as the State Bar of California, lawyers must promptly notify their clients upon receiving settlement funds and disburse these funds without unnecessary delay. The lawyer can only hold the funds for the time needed to clear the check and to resolve any outstanding issues, such as paying liens or reimbursing expenses related to the case.
Resolving Liens and Outstanding Bills
Before releasing your settlement funds, your lawyer is responsible for resolving any liens or outstanding bills related to your case. This includes paying off medical liens and bills, which can be a significant portion of your settlement.
Your lawyer will work diligently to negotiate and settle these obligations on your behalf. However, this process can take some time, especially if there are multiple liens or complex billing issues involved. In some cases, resolving liens from government agencies like Medicare or Medicaid can take several months.
Calculating and Deducting Legal Fees and Expenses
Another factor that affects how long your lawyer can hold your settlement check is the need to calculate and deduct legal fees and expenses. Your lawyer will determine their fees based on the agreed-upon percentage outlined in your representation agreement.
Additionally, your lawyer will deduct any case-related expenses they incurred while working on your behalf. These expenses may include court filing fees, expert witness fees, and the cost of obtaining medical records. Your lawyer must carefully review and account for all these expenses before distributing the remaining funds to you.
Distributing Funds to All Parties Involved
Once all liens, bills, fees, and expenses have been accounted for, your lawyer will distribute the remaining settlement funds to you. This final step in the process involves issuing checks or arranging wire transfers to ensure that all parties receive their allocated portion of the settlement.
Examples of Typical Timeframes for Lawyers Holding Settlement Checks
The timeframe for lawyers holding settlement checks can vary depending on the complexity of the case and the specific factors involved. However, here are some typical scenarios:
- In straightforward cases with minimal liens and expenses, your lawyer may be able to release your settlement funds within 2-4 weeks of receiving the check from the defendant or insurance company.
- For more complex cases involving multiple liens, extensive medical bills, or ongoing negotiations, the process can take longer. In these situations, it’s not uncommon for lawyers to hold settlement checks for 1-2 months or more to ensure that all obligations are properly resolved.
What You Can Do to Expedite the Process
While the timeline for releasing your settlement funds is largely dependent on your lawyer’s efforts, there are a few things you can do to help expedite the process:
- Promptly provide your lawyer with any requested documentation, such as medical bills or proof of expenses. The sooner your lawyer has all the necessary information, the more efficiently they can work on resolving liens and finalizing the distribution of funds.
- Maintain open communication with your lawyer throughout the settlement process. If you have any questions or concerns about the status of your settlement check, don’t hesitate to reach out to your lawyer for an update. Regular communication can help ensure that everyone is on the same page and working towards a timely resolution.
- Be responsive to your lawyer’s requests for information or signatures. If your lawyer needs you to sign any documents or provide additional details, make sure to do so as quickly as possible to avoid unnecessary delays.
Examples of Lawyers Misappropriating Settlement Funds
While it’s not common, there are unfortunate instances where lawyers misappropriate settlement funds. These rare but troubling cases highlight the importance of vigilance and accountability in legal representation. Here are some examples of lawyers taking settlement money meant for their clients:
- For instance, the former attorney Michel Avenatti, who represented Stormy Daniels in a lawsuit against former President Donald Trump, was sentenced to 14 years in prison for embezzling settlement money from a client and failing to inform the client about the terms of the settlement.
- In 2013, PG&E agreed to pay $200,000 to each family to settle their cases, but their lawyer, William James Reed, took the money for himself without informing his clients, according to prosecutors. When the families inquired about the settlement, Reed offered them only $97,000 each. In 2023, a jury found the 80-year-old attorney guilty of two counts of felony grand theft by embezzlement. Reed now faces a prison sentence of three years and eight months.
It’s important to note that regulations surrounding attorneys’ management of settlement funds are very stringent. It is highly improbable that you will encounter a scenario where you can assert that your lawyer misappropriated your settlement.
The Role of State Laws and Regulations
When it comes to handling settlement checks, International Financial Reporting Standards (IFRS) and US Generally Accepted Accounting Principles (GAAP) affect how law firms and businesses report these funds in their financial statements. For IFRS, the focus is on when the revenue from settlement-related services is recognized. Under IFRS 15, firms must recognize revenue when the service’s control is transferred to the client, impacting when settlement funds count as revenue. Additionally, IFRS 9 requires accurate measurement and reporting of financial assets, such as settlement funds in escrow, affecting how they are categorized on the balance sheet. IFRS 37 guides firms on recognizing and disclosing obligations or financial impacts from holding and disbursing settlement funds.
On the other hand, US GAAP has its own set of rules. ASC 606, similar to IFRS, determines when revenue from settlement services is earned and recognized in financial statements. ASC 305 deals with how settlement funds held in escrow accounts are classified and disclosed on the balance sheet. ASC 450 addresses accounting for and disclosing potential liabilities related to settlement funds. Both IFRS and US GAAP require accurate reporting of funds held in escrow, typically recorded as liabilities until disbursed, and proper management of client trust accounts for transparency and compliance.
It’s important to note that some laws and regulations governing the handling of settlement funds can vary from state to state. For example, some states may require lawyers to notify clients within a certain timeframe after receiving the settlement check, while others may mandate that funds be released within a specific number of days after all liens and expenses have been resolved. Your lawyer should be well-versed in the applicable state laws and will work to ensure compliance with all relevant regulations throughout the settlement process.
Takeaways and Next Steps
Understanding how long your lawyer can hold your settlement check is crucial for managing your expectations and planning your finances post-settlement. Remember that your lawyer is legally and ethically obligated to resolve all liens, bills, and fees related to your case before releasing the funds to you.
If you have any concerns about the timeline for receiving your settlement check, don’t hesitate to discuss them with your lawyer. Open communication is key to ensuring a smooth and efficient settlement process.
If you find yourself in need of immediate funds while awaiting the release of your settlement check, you may want to consider exploring legal funding options. Companies like Mayfair Legal Funding offer pre-settlement advances that can help you cover essential expenses and maintain financial stability during this waiting period.
Get the Support You Need with Mayfair Legal Funding
At Mayfair Legal Funding, we understand the financial challenges that can arise while waiting for your settlement check to be released. That’s why we offer pre-settlement funding services to help plaintiffs like you access the funds they need to stay afloat during this time.
Our experienced loan representatives will work with you to evaluate your case and determine the amount of funding you may be eligible for. Best of all, our pre-settlement advances are non-recourse, meaning you only repay the advance if you win your case or reach a settlement.
If you’re interested in learning more about how Mayfair Legal Funding can help you bridge the gap between settlement and payment, contact us today at (888) 357-1338 for a free consultation. Our knowledgeable team is here to answer any questions you may have and guide you through the legal funding process.
