Protecting Your Personal Injury Settlement: Understanding the Process and Avoiding Garnishment

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When recovering from an injury and unsure about your future, the worry of being exploited by your insurance company is the last thing you want. Filing a personal injury claim is already difficult. Accepting a settlement offer may seem tempting, but how do you know if it’s fair and sufficient for your long-term needs?

Trust a skilled personal injury lawyer to handle your claim and ease your burden. They are well-versed in insurance tactics and will fight for a just settlement. At Crosley Law, we understand the effects of injury on you and your family. Leave the claim filing, insurance communication, and unfair settlement disputes to us, while you concentrate on recovery.

This article provides a summary of the personal injury settlement process, including timing, protecting settlement money, and the possibility of garnishment. It addresses questions about garnishing a personal injury settlement and what to do with the money.

What is a settlement in a personal injury case?

A settlement is money paid by the at-fault party to resolve a claim. The insurance company wants to avoid legal action, so they offer a settlement before trial. They prioritize their profits over your well-being, and may give you less money than your case is worth. I need to learn how to protect my settlement money.

Settlements typically come in two different forms:

  • Lump-sum. A single payment made to you by your insurance carrier that was agreed upon and made quickly after talks
  • Structured. Payments that are made over time in accordance with the terms and value of your settlement and vary in size and frequency.

When you accept a settlement, your claim will be permanently ended, so be cautious about unfair offers. Consider future expenses caused by your injury when valuing your settlement.

What is a garnishment?

Garnishment allows a creditor to take a debtor’s assets to repay a debt. But, they need a court ruling and follow proper procedures to seize property. A personal injury settlement can also be garnished to satisfy a judgment.

Can a personal injury settlement be garnished?

Injured in an accident? Settlement money can cover medical bills and other costs, but big debt may worry you. Bankruptcy offers a fresh start, stops creditor harassment. Can creditors garnish lawsuit settlements? Lawsuits are vital for personal settlements.

Garnishment allows creditors to take money from debtors. Hiring a personal injury attorney can safeguard your accident settlement funds from garnishment. State laws determine if personal injury compensation can be garnished. Some states have limits based on amount, debt type, or compensation form, while others allow garnishment of all accident settlements.

Can settlement money be garnished?

Creditors can seize compensation for injuries in certain cases, depending on state law. Some states have limits on garnishments based on the amount, type of debt, or form of compensation, while others allow garnishment of all accident settlements.

Can my lawsuit settlement be garnished?

Consider these factors before filing a personal injury case. Will your creditors take your settlement if you were already in financial hardship before the injury? It may be disheartening to have your claim’s proceeds taken after going through the difficulties of a personal injury case. The good news is that, in most cases, it is illegal for creditors to seize the money from your claim. But you must take precautions to protect yourself and avoid unnecessary garnishment action.

Working with a dedicated attorney provides more than just legal assistance. A successful injury claim grants you access to a compassionate counselor who ensures you receive your rightful compensation.

How can I protect my settlement money?

After receiving a personal injury settlement, it is important to protect the funds from being seized or subject to liens. This involves understanding what to do with the money and taking precautions to safeguard it.

  • Understand Your Rights

Learn key information about your legal options before accepting a personal injury settlement in Texas. State law protects settlement funds from creditors, preventing them from accessing your bank account to satisfy debts, even if you owe money or have filed for bankruptcy.

  • Separate Your Settlements

Keep personal injury settlements separate from other income sources like salary or Social Security benefits. Put settlement funds in a separate account, not your main bank account, to protect them from creditors trying to withdraw money to pay debts.

The likelihood of a creditor using some of your personal injury settlement money to pay off debt rather than just taking it from your disposable income increases if you combine it with your normal income.

  • Make use of a prepaid debit card

Using a prepaid debit card instead of a regular one linked to your bank account can protect your personal injury compensation. You can use the prepaid card to pay bills or for emergencies without revealing your funds to creditors. It’s a convenient way to keep settlement funds separate from your bank account, but be aware of fees and restrictions. Some businesses may not accept prepaid debit cards.

  • Consult a personal injury lawyer

You can experience wage garnishment from creditors if your financial situation is precarious. Your personal injury compensation is shielded from creditors’ claims by law. However, it is crucial to take precautions to guarantee the security of your settlement funds, just in case.

What to do with personal injury settlement money?

In addition to causing bodily harm and emotional distress, a personal injury accident or medical misconduct can be financially costly. If your bills keep piling up or if your health insurance doesn’t cover the charges, you might be unable to work.

Examples of Personal Injury Settlement Amounts

When your accident payout comes in, it can be a huge aid and a comfort because the average personal injury claim is between $3,000 and $75,000. Although the typical personal injury settlement for a given case can vary greatly, it frequently includes damages for:

  • Car accidents
  • Medical malpractice
  • Slip and fall accidents
  • Wrongful death
  • Product liability
  • Pain and suffering

Here is a list of steps to take once you receive a settlement:

  • Deepen your breathing and wait

On the day you get your settlement, you are not required to make a decision. Making thoughtful decisions will probably result in better decisions. Give yourself enough time to consider all of your options before making a decision. Until you make a decision, put your money in a checking or savings account.

  • Recognize and address the implications for taxes

Most personal injury settlement funds are tax-exempt if they arise from physical illness or injury. This includes compensation for lost wages, emotional distress, medical expenses, legal fees, and contingency fees. However, punitive damages, contract violation damages, and interest on judgment amounts are exceptions to this tax rule.

  • Create a Plan

Creating a plan for settlement money is crucial to ensure it lasts and supports your family. Consider your finances, goals, and long-term needs to develop a strategy that meets your requirements.

  • Attend to your financial obligations

It’s time to start spending your money now. Taking care of your financial needs comes first. A roof must be over your head. That entails taking care of the mortgage or rent payment. As well as ensuring that the bills for basic necessities are paid on time. Additionally, you need to pay off your medical debt.

  • Make a Will and a Trust

A will and trust are necessary when you obtain compensation for your injuries. Your family’s safety and the representation of your interests can both be ensured through a will and trust. Utilizing a trust could have benefits, and your lawyer can help you understand your best options.

  • Think About Collaborating With a Financial Expert

Seek financial guidance to develop the best investment plan for your settlement. Experts can evaluate your needs and risk tolerance to help you choose the right strategy, whether it involves lump-sum or recurring payments. Their expertise ensures you maximize your settlement.


A personal injury advance might not have agreeable terms. Some law companies impose large advance fees or interest rates, which might reduce or even completely eliminate your settlement. If you require financial support while you wait for your personal injury settlement, you have additional choices. 

Consider borrowing from friends or family, negotiating payment plans with medical providers, or seeking a loan based on your expected settlement. Remember to compare offers and choose the best terms. Before deciding, weigh the risks of getting an advance on your injury compensation and consider alternative options.

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