Written by Aaron R. Winston
Last Updated: May 25, 2023 2:42am CDT
The legal world is a complex system of laws where attorneys have the most power, only second to the government that makes the laws that directly impact how the legal justice system runs. In addition to their legal knowledge and experience, lawyers who pass state bars and tests can try cases before courts.
With that being said, most of us are not attorneys and do not have a grasp on the many civil laws that apply to lawsuits and civil torts, so without getting legal advice and retaining an attorney’s services, we will struggle to keep up with the legal action.
Fortunately, that is where attorneys come in, as you can hire an attorney to handle the parts of legal discourse too complicated for us to manage ourselves. That’s why hiring a lawyer with expertise to represent you is especially important anytime you need to file a claim and not try to handle the claim yourself.
Still, when it comes to lawsuits and settlements, in many ways, you are at your attorney’s mercy as you put your trust in them, just like you would any skilled professional. They become your link and representation for your case and are there to help you on the litigation path, potentially all the way to the inside of the courtroom.
The classic example we will discuss in this article is personal injury cases. The goal for personal injury lawyers is to represent injured and damaged plaintiffs in civil lawsuits to sue for money. So when an attorney successfully reaches a settlement or wins a trial award, they will typically be sent and given custody of an awarded settlement check from the insurance company. That’s before they can finally disperse the final settlement amount to you.
Your lawyer’s control of and ability to hold your settlement check is allowed and is standard protocol. However, that does not mean it’s not frustrating and upsetting to know your lawyer is holding onto your settlement check and is not sending it right away, especially after already waiting through an entire personal injury lawsuit.
“My Lawyer is Holding My Settlement Check in Escrow”
In common situations like this, we still want clarity and answers. So that will be the focus of the answers we provide in this article, as we will discuss what an escrow account is and why it matters to you if you are waiting for access to your case’s settlement check money in escrow.
Most personal injury cases resolve by the claimant reaching a settlement agreement out of court with an insurance adjuster, which you could most likely expect (Your attorney will know the specifics of your case and can advise much better.).
So once you settle by signing the release form, the insurance company will send a settlement check to your personal injury law firm, which will keep it safely deposited in a bank account.
Lawyers usually keep a settlement check safe by holding it in escrow until the funds can be disbursed to all the lien holders and parties that are owed money. That means your settlement funds will remain deposited in the escrow account associated with your attorney’s office until the uncertainties are resolved and payments can be sent out.
Usually, the negotiation and settlement check process follows a simple pattern and sees release within a standard timeframe. Unfortunately, like everything legal, there are situations where the payment is not forthcoming and can lead to significant delays in receiving your settlement money. This begs the central question of how long an attorney can legally hold your settlement check in escrow.
What is an Escrow Account?
The financial sector is just as complicated, if not more complicated, as the legal one. There are several concepts and terms that overshadow the average person’s understanding of the financial field. One of the more commonly used terms in finance is “escrow,” which has become a significant part of business and bank finance.
However, most people do not have careers in finance, so not everyone affected by escrow accounts is aware of their meaning and understands how an escrow works.
The term “escrow” refers to a 3rd party holding onto assets, such as money, on behalf of the transacting parties. The type of escrow varies depending on the industry and has a specific role in legal affairs.
Regarding legal proceedings, the attorney usually opens an escrow account to deposit the settlement check. It protects the financial assets by ensuring the settlement check doesn’t expire.
IOLTA Trust Accounts vs. Escrow Accounts
Uncashed checks eventually expire and then be rendered invalid, so they must be cashed and placed into the escrow account for safekeeping to avoid the expiration issue. Similarly, there is another solution many attorneys have used since 1986, which is IOLTA (Interest on Lawyers’ Trust Accounts).
IOLTA: Large Grouping of Client Trusts That Can Earn Interest
These are large trust accounts that are made up of many smaller client trust accounts grouped together. The benefit of IOLTA is money in the account can earn interest, which has to be given to state government agencies to help the poor access free legal services.
Before the IOLTA was established in the US, client trust accounts could not bear interest because it was viewed as unethical for the lawyers to have client trust accounts that earned interest.
Ultimately, both client trusts and escrow are third party accounts that serve as safe storage for funds until it comes time to disburse them.
The final settlement payment to the plaintiff is usually the last check sent out.
The account usually remains under the control of the plaintiff’s attorney, who can access the account to write checks to pay off medical providers and cover other financial obligations. Then eventually, they can send a check to the clients they represented on the personal injury claim.
Case expenses and medical bills are an inescapable part of the personal injury settlement offer process, which means the attorney must remain in control of the account until the case is resolved and everyone gets paid.
That brings us to the primary question of how long can a lawyer can hold your settlement check funds in an escrow account before they must pay you the settlement money you are owed.
How Long Can a Lawyer Hold Your Settlement Check Money in Escrow?
Settlements from at-fault parties and insurance companies are meant to compensate the victims of a car accident, personal injury, or a negligence tort for their financial losses and help them return to everyday life with as minimal interference as possible.
How personal injury settlement offers are typically calculated will inevitably lead to the amount of settlement money in escrow your attorney will have to pay off the high cost of medical bills and hospital liens.
Attorneys want to be prompt with the disbursement of the settlement money, usually aiming to disperse your share of the funds within a few weeks. No win, no fee lawyers that handle personal injury claims only get paid once they distribute the settlement check money from escrow.
So it’s in their best interest to disperse the funds as soon as possible, as they want the contingency-based lawyers’ fee. Unfortunately, even with your attorney wanting to distribute the settlement money, it is not always best for you for them to release the funds quickly. Your lawyer may need to decide to hold onto the escrow account longer.
Just like how legal cases take much longer than you would like, so too does the time afterward involving the settlement checks have a habit of running into complications and delays.
So more often than not, the case’s resolution will leave you waiting longer than anticipated. Since the attorney must meet all the disbursement responsibilities, there is technically no official amount of time or limit for how long they can maintain the escrow account.
Although your attorney will need to pay many different parties before sending you your settlement check, the most common and time-consuming duty your personal injury attorney has before they can release the funds to you is to pay the medical providers using the settlement funds.
The escrow remains a valid account until they can disburse the funds appropriately. Simply put, your attorney can keep your settlement money in escrow indefinitely until the disbursement is worked out.
Based on my experience in the pre-settlement funding industry, I am confident that is not the answer any plaintiff wants to hear. The flip side is that an attorney typically has excellent reasons for delaying the disbursement of your funds out of escrow.
Personal injury attorneys usually only take their payment from the settlement proceeds once everyone’s share is decided and your share is ready to be disbursed.
What Percentage do Lawyers Take From Personal Injury Settlement Checks?
Generally, personal injury law firms charge two different percentage amounts depending on whether they had to litigate your case in court or were able to settle with the defendant in mediation.
Personal Injury Attorney Fees Percentage Amounts:
- 33% (1/3) of the total settlement amount
- 40% (4/10) of the trial award amount
Until your attorney can close out the negotiations with the settlement amount and accurately determine how much money will go to who they will have control of the escrow or trust account. Typically that means they don’t get their legal fee yet either.
As for preparing for potential delays, there are details you can use to ensure a delay is not the end of the world. The key is understanding the possible delays that might slow down and inhibit your attorney’s ability to disburse the check on time. Fortunately, the usual reasons to blame for delays are pretty standard and can be quickly resolved by your attorney’s staff.
The first significant issue that can impact your settlement’s disbursement is the creation of the check. Every state in the country has established a time limit the defendant must adhere to after the plaintiff signs the settlement claims release form.
Insurance Companies Can Be Slow to Send Your Settlement Check in the Mail
The settlement must be sent to your law firm within this timeframe, usually 30 days, if the defendant does not want to face additional consequences. Unfortunately, many insurance companies are not in a hurry to send the agreed-upon settlement amount and leave this process to the last minute.
These insurers who decide to wait for the whole period to elapse before sending the check to your personal injury lawyer can significantly delay the money from reaching your escrow account and leave you wondering where the funds are. Unfortunately, clients can quickly blame their attorney even when the insurance company is to blame for the delay.
If the insurer willingly does not send the settlement payment for an extended period, they can be penalized, resulting in more money for you, the claimant. This is not a common occurrence but can happen nonetheless.
Accounting for human error is an important detail when awaiting settlement funds. Even once the insurer has sent their payment, there remains the issue of check clearance.
Settlement Check Has to Clear at the Bank
A check can take two to five days to clear at the bank, and progress is only made on business days, so a check that is mailed on a Friday might not clear until the following Friday or even the Monday after that. So, in reality, it could take a full week for your settlement check to clear at the bank.
Moreover, there is always the potential for the check to get lost in the mail. It would require the insurance company’s bank to stop the check before a new one could even be resent out. That’s always going to cost a day or two for security reasons.
However, the actual time delay issues occur after your attorney gets the check. It’s an attorney’s responsibility to extend the amount the client will receive beyond forwarding the funds via a check you can use for your accounts.
These duties will always delay the disbursement of your check, but the more successful your attorney is at that stage, the larger the amount it will be for you at the end.
Payment of Costs and Bills
One of the most critical responsibilities of an attorney is distributing the funds in the settlement escrow. Some people forget that the disbursement is not only to the defendant but to the medical providers and hospital facilities the defendant saw and used during the case.
In a personal injury case, the settlement funds must be divided to pay off the outstanding liens held by your medical providers, so the cost of your treatment is covered, and you do not have to be in their debt. While this might seem straightforward, it can be one of the most time-consuming details in settlement negotiation.
That is especially true if Medicaid or Medicare was involved in the treatment associated with the injuries of your case or if there are any other outstanding liens, such as owed child support payments.
Usually, the medical costs play a significant role in the total offered in the settlement since the settlement itself is designed to repay those medical costs and offset other costs of your financial situation. Your attorney must ascertain the dollar amount needed to pay your medical expenses before the disbursement begins. Otherwise, your attorney is at the disadvantage of not knowing how much they can keep for you in the account.
Paying Less for Amount Owed on Medical Liens
Some states help out the plaintiffs by allowing for medical liens, which allows for attorneys to perform additional negotiations on the liens held by your medical providers.
When an attorney negotiates with a medical provider, they do so to lower the amount that you owe to them as they agree to accept a lesser dollar amount. This way, less money is sent to the medical provider, and more is available for you should the negotiations for reductions prove in your favor.
Unfortunately, most medical providers are not happy with the idea of accepting less money and will counter the initial offers made by your attorney. This situation can cause the negotiations to drag out and delay the disbursement of settlement funds.
Once all lien holders and the medical providers have agreed to the proposed reductions, the attorney can begin disbursing funds. However, the negotiations for these reductions can take weeks or even months to resolve. The upside is that successful negotiations lead to reduced overall medical costs and a more substantial settlement amount for you.
The issue with the process taking this long is that it can adversely affect your ability to meet financial responsibilities while you wait for the negotiations to conclude. This situation can cause significant stress to you and your family as you struggle to make ends meet. Fortunately, it is something you can counter with the right resources.
Pre-settlement Funding Can Help You Not Settle Too Early for Less
Rushing your attorney to settle your case early because of financial pressures and obligations is not only a bad idea but is less practical than one would think. Even if you did settle today, you would still need to wait for the insurance company sends out the check and for your attorney to disperse it.
However, there is one option you can do if you are tempted to settle your case, and you need some settlement money now and not later to pay your bills. You can ask your attorney or law firm about applying for pre-settlement funding, which is a cash advance with the lien placed against your potential settlement.
In most states, the money is advanced as non-recourse funding and not a loan. So credit checks should not apply. Florida, Georgia, and Texas are examples of non-recourse funding states where it is not a loan.
Conversely, in Missouri, it is a credit-based lawsuit loan product where the lien is on the client. So Missouri consumers are borrowing money, which they contractually have to pay back regardless of the case outcome. (These pre-settlement loan companies are required to be licensed by the Missouri Division of Finance. That licensing is not optional even if they claim they provide it non-recourse.)
Lawsuit funding has only just begun to gain prominence as a no longer obscure consumer financial product nationwide. (Please note it is not a viable financial product in all states. For example, the governments in Arkansas and West Virginia essentially “banned” legal funding. They set rate caps that made it impossible to maintain a successful consumer legal funding business venture and still follow those laws.)
More and more attorneys and law firms are seeing the value that pre-settlement cash advances provided ethically and legally can help their injured clients. The demand for plaintiff pre-settlement funding and application requests has increased with the rising rate of inflation.
So attorneys who may have once been hesitant or even against signing the Attorney Acknowledgment section for a client’s funding agreement may do so more quickly. Legal funding is not a fringe benefit of having a personal injury case.
The money is meant to help injury and accident victims cover the cost of their rising living expenses while their lawsuit is pending. Lawsuit funding is all the more critical for people who are injured and out of work as, in many states, attorneys are not allowed to give their clients even a 0% loan to help them financially survive during their case.
Getting the Settlement Money You Deserve
Settlements for civil claims can be straightforward or complicated, depending on the case’s circumstances. Regardless, they are always at least in part unique to the particular plaintiff and the defendant involved.
That is why we, as the legal funding company, are a third party that does not intervene or has a say in your case. We entrust the decisions, negotiations, and settlement check timeline to the attorneys.
Your lawyer and law firm are there to follow your wishes and act in your best interests. They can help you get the settlement agreement you deserve and advise you whether you should litigate your claim in court. The escrow (or client trust) account they store the cash funds in allows them to ensure the settlement money remains accessible and the check does not expire.
Unfortunately, because some cases can last a long while and accumulate medical bills, your attorney may have to hold onto the funds for longer than anticipated. It is understandable the idea that your attorney can hold onto your settlement indefinitely can be disconcerting.
The amount of time is finite and won’t last forever. Typically months and not years. Your attorney is just as motivated to disburse your share of the settlement so they can get their fee and will not hold it in escrow longer than they absolutely must.
We at Express Legal Funding are a pre-settlement funding company based in Plano, Texas, and we experience firsthand how disbursing checks from escrow and IOLTA take time.
If personal injury attorneys could pay the legal funding company and the reduced amounts to the medical providers with liens on day one and then send you your check on day two, they would. They don’t want to delay. It costs lawyers time and money to hold your settlement check in escrow.
We hope you found this a valuable resource about how long a lawyer can hold your settlement check in a trust. If you want to learn more about the car accident lawsuit check timeline or lawsuit settlements in general, the Express Legal Funding blog is a great place to go and get that information.
If you need financial assistance during a lawsuit, you can contact us anytime for a free consultation about the pre-settlement funding services we provide.
About the Author
Aaron Winston is the Strategy Director of Express Legal Funding. As "The Legal Funding Expert," Aaron has more than ten years of experience in the consumer finance industry. Most of which was as a consultant to a top financial advisory firm, managing 400+ million USD in client wealth. He is recognized as an expert author and researcher across multiple SEO industries.
Aaron Winston earned his title “The Legal Funding Expert” through authoritative articles and blog posts about legal funding. He specializes in expert content writing for pre-settlement funding and law firm blogs.
Each month, thousands of web visitors read his articles and posts. Aaron's thoroughly researched guides are among the most-read lawsuit funding articles over the past year.
As Strategy Director of Express Legal Funding, Aaron has devoted thousands of hours to advocating for the consumer. His "it factor" is that he is a tireless and inventive thought leader who has made great strides by conveying his legal knowledge and diverse expertise to the public. More clients and lawyers understand the facts about pre-settlement funding because of Aaron's legal and financial service SEO mastery.
Aaron Winston is the author of A Word For The Wise. A Warning For The Stupid. Canons of Conduct, which is a book in poetry format. It consists of 35 unique canons. The book was published in 2023.
He keeps an academic approach to business that improves the consumer's well-being. In early 2022, Aaron gained the Search Engine Optimization and the Google Ads LinkedIn skills assessment badges. He placed in the top 5% of those who took the SEO skills test assessment.
Aaron's company slogans and lawsuit funding company name are registered trademarks of the United States Patent and Trademark Office. He has gained positive notoriety via interviews and case studies, which are a byproduct of his successes. Aaron R Winston was featured in a smith.ai interview (2021) and a company growth case study (2022).