Handling Finances During a Lawsuit Settlement

Handling Finances During a Lawsuit Settlement

When you file a lawsuit against another person or a company, you may stand to receive a large settlement at some point in the future. If you are in line to get a settlement, figuring out how to handle your finances can be a challenge. There are various fees that you have to be aware of, and a number of factors have to be considered. Here are a few tips to keep in mind when trying to handle your finances surrounding a lawsuit settlement.

Contingency Fees

In many cases, when you work with a lawyer for a big lawsuit, they may work on a contingency basis. This means that they will not collect any fees from your the front end, but they will take a certain percentage of the total settlement that you receive. This is a popular arrangement regardless of whether you work with a P.C. or with an individual lawyer.

If you enter into this type of agreement with an attorney, it is important to make sure that you set aside enough money to pay for the contingency fee upon the settlement. Calculate the amount of money that you’ll have to pay based on the percentage of the settlement and then set aside that much for the payment when it is received.


Sometimes, lawyers will not want to work on a full contingency basis. Instead, they may ask to be put on a retainer. With a retainer, they ask for a certain amount of money upfront to cover their costs. This buys you a specific amount of service from the lawyer, and then you have to pay more once the work threshold has been crossed by the lawyer. Many prominent attorneys like Joel H. Schwartz, P.C. will use this method from time to time.

Other Costs

When you take someone to court, there are a number of other costs that you may have to consider. The lawyer may charge you a certain amount of money for other services along the way, besides his own legal fees. You may also have to pay court fees for filing the lawsuit and getting the process started.

Lawsuit Advance

Since you sometimes have to pay things out of pocket before you ever get a lawsuit settlement, many plaintiffs pursue lawsuit advances. With a lawsuit advance, you work with a funding company to give you a certain amount of money based on the value of the projected settlement. The funding company gives you the advance, and then they are paid back when you get the settlement.

The nice thing about this type of arrangement is that you don’t have to pay back the money if you somehow lose the case. The risk is transferred to the funding company, and they have to figure out if you stand a good chance of being able to win the case.

If you are thinking about getting a lawsuit advance, you need to make sure that you understand the fees and rates charged. The funding company will give you less than what you could get if you waited on the whole settlement. In many cases, it can be in your best interest to go ahead and take a settlement so that you can have some money to pay your expenses. Just make sure that you’re not settling for too much less than what you would get from the case settlement.


It may be in your best interest to open a special bank account to handle the legal proceedings. You can put some money into it to cover legal fees and to receive the settlement payments in the future. This way, you don’t entangle your personal finances with the lawsuit money.

Author: Jeremy Vohwinkle

My name is Jeremy Vohwinkle, and I’ve spent a number of years working in the finance industry providing financial advice to regular investors and those participating in employer-sponsored retirement plans.

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