Can My Personal Injury Settlement be Garnished?
Your settlement may or may not be garnished depending on what type of debt or obligation you have and how you handle that money. There’s no “hard and fast” rule for this situation. Some of our clients receive substantial settlements, and they should engage in financial planning to make the most of their money.
MJB Law Group’s Tustin personal injury lawyers help clients throughout Orange County after they’ve suffered a severe injury in an accident. Contact us to schedule a FREE case evaluation and consultation where we can discuss your situation, how California law may apply, and your legal options. Call us today at (949) 266-0880 or fill out our confidential contact form.
What is Garnishment?
If you are successfully sued and the plaintiff seeks money from you, the presiding judge may issue an order allowing them to garnish your wages (take a percentage) or levy on a bank or other financial account (take money out of it up to the amount you owe). Either can result from an unpaid loan, a breached contract, back taxes, or unpaid child or spousal support. These are the approaches plaintiffs may take if you’re unwilling or unable to give them money to satisfy the judgment against you.
If you’re later injured in an accident and pursue legal claims, tell your personal injury attorney about these prior judgments. We may be able to structure a settlement to avoid or lessen their financial impact.
What are the Chances My Case Will Settle?
If you’re injured in an accident caused by another party, you can make a claim against the responsible party’s insurance. If they don’t offer an acceptable settlement, you may be able to file a negligence lawsuit against that party. The insurance company may be responsible for providing their insured with a legal defense and paying a settlement or jury verdict in your favor, subject to exclusions and limitations in the policy.
Unless you withdraw your claim or your case is dismissed by the court on technical grounds, it is highly likely that your case will settle.
If you’re injured in an accident and retain our services, we will investigate your case and estimate its settlement value. We’ll discuss that figure with you and, with your consent, present it to the responsible party’s insurance carrier as a settlement demand, along with the facts and information that support your claim. We normally engage in negotiations and may provide the insurer with additional information.
Usually, both parties come to a settlement agreement, which includes a sum of money. If not, we usually file a lawsuit against the party responsible for your injuries and start litigation. But negotiations normally continue, and nearly all personal injury claims are resolved and settled before a judge or jury decides.
There could be many reasons why settlement negotiations fail. The parties may be far apart in their opinions on how much the case is worth. One or both parties may be unreasonable during negotiations and refuse to reach an agreement.
How Can Someone Take the Settlement From Me?
Personal injury settlements in California are generally exempt from being garnished or levied upon, with exceptions. So, depending on the circumstances, they shouldn’t be able to take that money from your account. You may lose that protection if you don’t handle it properly.
State law allows creditors to garnish or levy:
- A quarter of your disposable income (what’s less after paying for necessities) or
- Half the amount by which your earnings exceed 40 times the state’s hourly minimum wage
- Whichever is less
A mistake to avoid is depositing the settlement check like it’s any other kind of income. If you do so, you risk it being mixed with your regular income and potentially available to creditors. Here are suggestions for keeping as much of your settlement as possible:
- Keep your settlement money away from your other funds. Think of them as oil and water – they don’t mix. Start an account just for this money. You could even put it in a different bank, or depending on your overall financial situation, convert it from cash into some kind of investment (if your settlement is a good amount, you should discuss what you should do with it with a financial planner)
- Keep accurate records of your settlement money, how much you received, and where it went. Document how you’ve spent it, whether that’s with bills, invoices, or receipts. If your settlement becomes an issue in the future, you want to show where the money went, how much, and why
You should also consider contacting these judgment creditors and be upfront about your settlement. They will regularly check your financial status to see what they can get from you. Instead of waiting for them to come to you, after getting and heeding professional advice on how to protect your settlement, you could contact them, address the issue head-on, and put it behind you.
Who Must I Pay With My Settlement?
The law creates a hierarchy of people you owe money to. Some are ahead of others in line, others may be out of luck.
You must pay your medical bills. A healthcare provider may have a medical lien on your settlement and may or may not be open to negotiating lower payment. Your health insurer, including Medicaid or Medicare, is entitled to reimbursement for accident-related bills. They too may be willing to negotiate a lower payment to resolve the matter.
Generally, your settlement is not taxable income for federal or state taxes, depending on what the settlement compensates you for. A portion of your settlement could be used to pay child support.
Getting a lawsuit settlement doesn’t completely make you immune from garnishment or your accounts being levied. If, thanks to you resolving some debts or paying for needed items with your settlement, your work income stays the same (or increases over time), your expenses decrease, and you’re able to save more money. That non-settlement money in your accounts may be levied upon and your income may be garnished.
Contact Our Tustin Personal Injury Lawyers Today
If you or a loved one are severely injured because of another party’s negligence or carelessness, we can help you find justice. MJB Law Group provides compassionate legal guidance, so you can learn about your options and choose the one that is best for you and your family.
MJB Law Group California personal injury attorneys listen to and care about our clients. Contact us for a FREE case evaluation and consultation to discuss your case and how California law may apply. Call us at (949) 266-0880 or fill out our confidential contact form today.
