Summary
- Settlements are typically paid to a party’s lawyer
- A lawyer must settle claims to the client’s property before releasing it
- There is no time limit for holding checks, but lawyers must act diligently
Settlements often require time and hard work by you and your attorney. However, a settlement might not necessarily end your case. Many people may have provided services expecting to be paid once you win. The lawyer must resolve all these claims to your settlement before distributing your share.
How long can a lawyer hold your settlement check? This process can take days or even weeks. At the same time, the client often needs their settlement to pay living expenses and seek medical care for their injuries. This tension can cause bad blood between lawyers and their clients, particularly if the lawyer does not explain the situation clearly.
In rare cases, the delay occurs because the lawyer has taken the client’s funds. These actions expose the lawyer to criminal charges, civil liability, and professional discipline. If this happens to you, a new lawyer can file a legal claim against the lawyer and their firm for a return of the stolen property.
ConsumerShield educates people about the legal issues they face. We also refer people to lawyers to provide legal advice and representation. Contact us for a free case review.
Legal Duties of Lawyers
It might seem like your lawyer is holding your settlement check arbitrarily or to protect themself. However, the ethical rules require lawyers to protect your property but also hold your property until all claims against it have been resolved.
Specifically, most states have ethical rules based on the ABA Model Rules of Professional Conduct or its predecessor, the ABA Model Rules of Professional Responsibility. Rule 1.15 defines a lawyer’s ethical duties when holding client property.
Lawyers must protect the property by keeping it separate from property belonging to the lawyer or law firm. They must preserve it, including by paying any bank fees using the lawyer’s funds rather than the client’s property. Most importantly, the lawyer must hold any disputed amounts and distribute the property “promptly” after resolving them.
Even though you have resolved your disputes with the opposing party, you have not yet resolved the possible claims to your payment, including the following.
Medical Liens
If your case involved a personal injury claim, your medical providers may have agreed to wait for your settlement to bill for your medical care. In other words, rather than sending bills that you could not pay, the hospital may have filed a lien against your personal injury settlement. When you get paid, the hospital gets paid.
The benefit of this system is that you do not need to worry about the hospital sending your bills to a collection agent. Moreover, when the lawyer receives your settlement check and knows how much you have to pay medical bills, they can negotiate with the hospital to try to reduce the bills. However, this negotiation can take time.
Thus, clients might wonder, “Why is my car accident settlement taking so long?” In many cases, the delay is intended to protect you from collections agencies and lawsuits from medical providers and preserve as much of your car accident settlement as possible.
States vary in whether they allow medical liens and what restrictions they impose. For example, Illinois allows medical liens for up to 40% of the settlement or judgment.
Litigation Costs
Litigation costs are hard expenses associated with your case. Your lawyer may front the money to pay these fees so your case stays on track. However, you must reimburse the lawyer for their expenditures when you get paid.
In other situations, the lawyer may hold the bill until the end of your case. They will then use your settlement payment to pay the outstanding bills.
The following costs are commonly incurred in litigation:
- Medical record charges
- Court filing fees
- Deposition expenses, such as court reporter fees
- Expert witness costs
- Courier and copying fees
The lawyer does not need to negotiate these charges. Instead, they will usually pay them as long as they are reasonable.
Lawyer’s Fees
Your lawyer can use your settlement to pay their legal fees. How much does a lawyer cost? Your legal fee will vary depending on your case and the lawyer’s billing structure. If you paid hourly fees, the lawyer should send periodic bills so you know all your charges.
In contingency fee cases, the lawyer will deduct the agreed-upon percentage from the settlement as a fee. For example, car accident lawyer fees might range from 33% to 40% of your settlement. If you think the lawyer’s bills are excessive, you can try to negotiate a reduction.
How Long Can a Lawyer Hold Money in Trust?
The ethical rules limit how long a lawyer can hold your money in their trust account. First, lawyers must act with reasonable diligence and promptness in handling your case. Thus, a lawyer cannot unreasonably delay when resolving claims to your settlement and paying you.
Second, Rule 1.15 requires lawyers to distribute any undisputed amounts promptly.
Suppose that you received a settlement check for $100,000. After lawyer fees and litigation costs, there is $65,000 left in the lawyer’s trust account. If the lawyer is negotiating with a hospital over a $25,000 lien, $40,000 remains undisputed. The lawyer can distribute this amount to you and continue to work on the $25,000 medical bill.
Do Lawyers Steal Settlements?
Although it rarely happens, lawyers have stolen settlements. If a lawyer steals a settlement, they can be prosecuted for theft.
For example, Florida’s theft statute would cover holding a settlement check if the lawyer intends to deprive you of your property or appropriate it for their use. Additionally, a lawyer could get suspended or disbarred for stealing from clients.
In this case, you can pursue a lawsuit against the lawyer. If the lawyer had malpractice insurance, you may file an insurance claim.
How long can a lawyer hold your settlement check before you take action? You should act quickly once you suspect the lawyer has stolen your settlement. If you wait too long, the lawyer might disappear with your settlement and you will never recover it.
