What is a lien and how does it affect a lawsuit settlement?

Victims of personal injury claims are surprised when they receive a settlement amount less than expected. If you have filed a personal injury claim or lawsuit and expect a particular settlement or award, consider understanding what a lien is. 

Owing money to government authorities or insurance companies, having outstanding debt from creditors such as banks, or having a financial arrangement with a lawsuit funding company, means they have a legal claim in your future settlement money or verdict payout. This means that the declaration of lienholders will be satisfied, and the remaining amount from the winning settlement will later be transferred to you.

This article will discuss the concept of liens and the most common lienholders. It will also discuss the impact of the lien on your lawsuit settlement. So let’s dig into it.

What is a settlement lien?

A settlement lien is a legal terminology that refers to a third-party legal claim to all or some of your judgment or settlement money.

If there is a valid lien, the lienholder will be entitled to receive their share of the settlement amount awarded by the court, and if all the liens are satisfied, the claimant will receive the remaining amount of the settlement.

When you file a personal injury suit and claim compensation for the injuries caused to you, the lien holders will approach the courts and provide evidence to establish their legal right of lien in your settlement or award. Additionally, they will submit a document or other evidence to prove their lien. 

If the court recognizes its legitimacy, the lien holder will be informed about the final settlement payment, and they will get their legal share before the claimant. Once the liens are satisfied, the claimant will receive the remaining amount.

Who can place a lien on a personal injury claim?

Lienholders are like creditors who have provided funding or service to you under the condition that you will pay back to them. They can be both private and public entities.

Some of the standard lien holders are explained below:

1- Government Agencies

One of the most common lien holders is government agencies such as Medicare, Medicaid, etc. Similarly, you can expect a lien on your settlement if you owe back taxes to the internal revenue services (IRS).

Government agencies with a valid claim of lien approach the court to satisfy their claims, and their claim takes precedence over other lienholders. This means that the lien of government agencies is satisfied first, and then the claims of other lienholders are entertained.

2- Insurance Companies

Insurance companies are also common lienholders in personal injury claims. If you have incurred injuries and the insurance company paid your medical bills, you can expect a lien from them towards your pending settlement.

3- Medical liens

When you need medical treatment for injuries that result from a personal injury, and you don’t have insurance to pay for the cost of the procedure, medical providers can put a lien on your upcoming settlement.

4- Unrelated Liens

In addition, other creditors with outstanding debt, such as bank loans, may also have a valid lien claim and may approach the court to receive their share of your compensation.

5- Personal Injury Settlement Funding Liens

If you have received personal injury settlement funding from a lender, they will have a valid legal claim to receive the agreed-upon amount they gave you from the anticipated settlement.

Lawsuit funding is also a lien, and funding companies will receive their share after the claim is satisfied. Only then will you will be entitled to the remaining amount of the settlement claim.

Last thoughts

Lawsuits can take months and even years to finally decide. As a result, personal injury victims face problems paying for their financial liabilities. Due to these financial concerns, some claimants may not be able to continue their legal battle. The good news is that lawsuit settlement funding companies may provide financial assistance to accident victims of personal injury lawsuits.

Lawsuit funding companies provide advances to those with meritorious claims, who, in contrast, may not be able to pursue their case until the end due to financial restraints. This means you can borrow from your future settlement proceeds upon approval. You will simply receive funding to pay medical bills, living costs, and more by agreeing to pay a specific interest rate on the loan against the coming proceeds, which will be placed as a lien.

Want to learn more about lawsuit loans? Look to Baker Street Funding for quick personal injury legal funding today.