What is a Disbursement for a Settlement?

by Renee Booker ; Updated July 27, 2017
A lawyer discusses legal matters with two clients

If you filed a lawsuit against someone and subsequently reached an out-of-court settlement, the funds representing the settlement must be disbursed to you. How long it takes to disburse the funds and the process for disbursement, or payment of funds, varies depending on the type of lawsuit, jurisdiction and amount and terms of the settlement.

Reaching a Settlement

Technically, a lawsuit does not have to be filed in order to reach a settlement for injuries you have suffered. Often, your attorney will contact the negligent party and attempt to negotiate a settlement without filing a lawsuit. Oftentimes, the parties are free to reach an out-of-court settlement until, and even after, the lawsuit is presented to a judge or jury. Once the settlement amount and terms have been agreed upon, the defendant must initiate the process of disbursing the settlement.

Disbursement Process

The terms of the settlement typically dictate the disbursement process. Settlements for relatively minor injuries, for example, are generally paid in one lump sum shortly after the settlement is reached. Larger settlements, however, may be paid in installments over a period of months, or even years. Regardless of whether the agreement is for a lump sum or installment payments, the funds are generally sent to your attorney, if you are represented by one. The reason for this is so your attorney's fees can be deducted from the funds, and any other bills for which your attorney has agreed to be responsible. The remainder is paid out to you.

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Disbursement Accounting

If you are represented by an attorney, she is required to provide you with a detailed accounting of the disbursement of your settlement funds. The accounting should indicate the initial settlement amount, amount paid to the attorney and any expenses deducted from the settlement. It should also specify any bills or liens paid on your behalf by the attorney. For example, if the injuries resulted from a car accident case, the doctor who treated you may have a lien, or interest, in the settlement funds, and your attorney is ethically obligated to pay that bill before disbursing the remainder to you.

Considerations

State laws determine which bills, fees and expenses are legally required to be deducted from a disbursement by an attorney. If you are not represented by an attorney, you may receive the entire amount of the disbursement without any deductions for bills. However, you are still legally responsible for paying any outstanding bills that have not already been covered. In some cases, the insurance company paying out the settlement will have paid doctor bills along the way. In that case, the amounts paid are included in the disbursement accounting. Regardless of who disburses the settlement funds to you, carefully review the accounting to be certain which bills have been paid and what you remain accountable for paying.

About the Author

Renee Booker has been writing professionally since 2009 and was a practicing attorney for almost 10 years. She has had work published on Gadling, AOL's travel site. Booker holds a Bachelor of Arts in political science from Ohio State University and a Juris Doctorate from Indiana University School of Law.

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