How Settlement Checks Are Processed: A Step-by-Step Guide

Once your personal injury case is settled, your next question may be, “When will I get my money?” There is a process to getting your settlement check, and sometimes this can involve unexpected delays. Understanding each stage of the settlement check process can help you know what to expect, manage your timeline realistically, and reduce stress during what can already be an overwhelming time.

You may wonder, “how long can a lawyer hold your settlement check?” Lawyers are required to follow strict state laws and professional ethics when handling clients’ money. With regard to settlement funds, the American Bar Association (ABA) (i.e., ABA Model Rule of Professional Conduct 1.15) states that settlement funds should typically be disbursed within weeks of receiving them. However, this process could take longer due to liens, banking procedures, or other administrative issues that must be resolved before funds are released.

What is a Settlement Check?

A settlement check is the money an insurance company or a defendant pays the plaintiff after both parties have agreed to a settlement. If a settlement is reached, the case is not taken to trial. This financial compensation is intended to resolve the legal dispute once and for all, which is why certain formalities and safeguards are put in place before the plaintiff receives the money.

The Settlement Check Process

Step 1 – Both Parties Reach a Settlement
The process begins with both parties agreeing on the compensation amount. After this agreement, the plaintiff must sign a release form confirming acceptance of the settlement terms. Only once this form is signed can the settlement funds be issued. Signing this release also means you agree not to pursue any further legal action related to this claim, making it a final and binding step.

Step 2 – Settlement Check Issued
Next, the insurance company or defendant issues the settlement check. In most cases, they are required to do so within 30 days of reaching the settlement. Many states have strict rules regulating this timeline, and failure to issue the check on time could result in penalties.

Step 3 – Check Deposited
When your lawyer receives the settlement check, they will deposit it into a dedicated trust (or escrow) account. Banks can hold funds for several days while the check clears, which allows time for verification and prevents issues like bounced payments. Although this waiting period can feel inconvenient, it provides both you and your lawyer with security and ensures the funds are legitimate.

Step 4 – Pay Off Liens and Legal Fees
Once the check has cleared, your lawyer will begin disbursing the funds. The first priority is paying off any liens, if applicable. A lien is a legal claim from third parties—such as hospitals, Medicare, or health insurers—seeking reimbursement for medical care they provided. After these obligations are met, your lawyer will deduct their legal fees and case-related costs, which were agreed upon in your contract. This step ensures that all outstanding financial responsibilities tied to your case are settled before you receive your share.

Step 5 – Plaintiff Receives Settlement
After all deductions are complete and everyone involved has been paid, the remaining balance is sent to you. Depending on your preference and your lawyer’s practice, you may receive your settlement funds through an electronic transfer or a physical check. With this final step, the settlement money officially reaches your possession, marking the conclusion of the process.

Additional Considerations

Settlement checks may take some time to process, but deadlines exist that both the insurance company and the courts must follow. From the moment the check is issued to the clearing of funds, payment of liens, deduction of legal fees, and final disbursement, a structured and transparent process is followed. While it may sometimes feel drawn out, each step is designed to protect all parties involved and ensure compliance with the law.

Patience is often necessary, but having a clear understanding of how settlement checks are processed can give you a better sense of when you will actually receive your money. It also allows you to plan your finances more effectively during the waiting period.

Key Takeaways

• Settlement checks go through several steps of processing before the money is deposited into the plaintiff’s account.
  ● Liens and lawyer’s fees are first deducted from the settlement amount.
  ● Liens, banking process timelines, or court approvals are the most common causes of delays in receiving your settlement.