Does Pre-Settlement Funding Reduce Your Settlement?

Yes. A funding payoff comes out of your settlement, and the check you take home is smaller than it would have been without one.

It is worth being precise about what it reduces, though. It does not change what the defendant pays or what your case is worth. It reduces your share at the end, which is a different thing.

It is also one of the few deductions you choose to add. Attorney fees and applicable case costs generally exist independently of funding, while medical and other liens depend on the specifics of the case.

In this article, we walk through the full disbursement order, run the same $75,000 settlement three different ways so you can see the numbers side by side, and cover the five things that protect your final check.

The Short Answer

The payoff comes out of your share at disbursement. How much it reduces your net recovery depends on the amount advanced, how long the funding remains outstanding, and the fee structure in your agreement.

Key Takeaways

• The payoff is a deduction from your share, not from the gross settlement.
• Attorney fees and applicable case costs generally exist independently of funding, while liens and reimbursement claims depend on the case.
• The amount advanced, length of the case, and fee structure all affect the final payoff.
• Taking the smallest amount that solves the problem protects the most.
• Nothing is owed if the case ends without a recovery.

What Comes Out of a Settlement Before You Do?

A settlement statement may include items such as the following, though the exact order depends on the case, agreements, and applicable law.

• Gross settlement amount
• Attorney fee, normally a contingency percentage
• Case costs, such as filing fees, expert reports, and records requests
• Statutory liens, including hospital liens and government reimbursement claims
• Contractual liens, including letters of protection and health plan reimbursement
• Pre-settlement funding payoff
• Net to you

Attorney fees and applicable case costs generally exist independently of pre-settlement funding. Depending on the case, the settlement may also be subject to medical, government, insurance, or other reimbursement claims.

Attorneys are required to safeguard client and third-party funds. ABA Model Rule 1.15 addresses these responsibilities, and most U.S. jurisdictions have adopted versions of the Model Rules. Settlement proceeds are therefore generally handled through the attorney’s trust account before the client’s share is distributed.

Case costs are the out-of-pocket expenses the firm fronted to build your case, and on a case that required expert testimony or accident reconstruction, they can run into five figures.

Liens can also substantially reduce the amount left for the plaintiff. A hospital lien, health plan reimbursement claim, or Medicare conditional payment may affect the final net recovery, depending on the case.

The Same Settlement, Three Ways

Below is one $75,000 settlement shown three different ways. The numbers are an illustration built to show the arithmetic, not a quote and not a prediction for your own case.

All three columns assume a 33 percent contingency fee, $3,500 in case costs, and $8,000 in medical liens. The funding columns assume a 3 percent monthly fee that does not compound.

The bottom row shows the total amount received over the life of each example. In the middle column, the $5,000 advance resulted in $2,100 in funding fees over fourteen months.

The right-hand column resulted in $13,500 in funding fees because a much larger amount remained outstanding for longer at the same illustrative rate.

What Actually Drives the Number?

Three main variables affect the size of your pre-settlement funding payoff.

The Amount Advanced

The fee is calculated on what you took, so every extra thousand dollars carries its own cost for the life of the case. Of the main cost drivers, the amount you request is generally the one you have the most control over.

The Time It Is Held

Time is another major factor, and it is often harder for plaintiffs to predict or control. Under the simple 3% monthly fee used in this example, holding the same advance for 30 months rather than 12 would more than double the total fee.

Our article on why lawsuit funding payback grows over a long case shows how that builds month by month.

The Fee Structure

A rate that compounds monthly produces a very different number at 30 months than a flat rate on the original amount, even when both are quoted as the same percentage. Ask which one you are being offered, and ask whether the agreement caps the total.

Why Taking Less Protects Your Check

The goal is to request enough to cover the immediate gap without taking more than you need.

Work out what you actually need to stay housed, fed, and treated for the next few months, then request that amount. If the case runs longer than expected, you may be able to request additional funding later, subject to approval.

Under a fee structure that increases with time, taking only what you need now and requesting additional funding later can reduce the amount of time the second portion accrues fees. Our guide to getting funding more than once covers how that works.

Here is the same idea in numbers, using the fee assumption from the table above. Taking $6,000 at the start and another $6,000 at month 18 on a case that settles at month 30 would result in about $7,560 in total fees. Taking the full $12,000 at the start would result in about $10,800 in fees. Under this simplified example, delaying the second $6,000 reduces the total fee by about $3,240.

That approach only works if you can wait to request the second portion, and it may require another application and approval. Whether it makes sense depends on your circumstances and the agreement terms.

How Does Funding Interact With Your Medical Liens?

Liens and the funding payoff come out of the same pool of money, which is why a large lien and a large advance on the same case can leave very little behind.

A funder may consider known treatment costs, liens, and other obligations when evaluating how much the case can support.

Some medical bills, liens, and reimbursement claims may be reduced or negotiated, depending on the type of claim and applicable law. Any successful reduction can increase the amount remaining for the plaintiff.

Our article on how medical liens affect your injury settlement check covers which types can be reduced and what leverage your attorney has.

Can Funding Give You More Time to Settle?

Someone facing urgent rent, medical, or living expenses may feel pressure to resolve a case quickly. An advance can help cover those expenses while the attorney continues handling the claim, giving the plaintiff more financial flexibility to wait. However, funding does not guarantee a higher settlement.

Case value depends on the facts, evidence, liability, damages, negotiations, and other factors unrelated to funding. If the case ultimately resolves for the same amount, additional time may instead increase the funding payoff. Whether waiting makes sense is a case-specific decision to discuss with your attorney.

Funding also does not automatically consume an entire settlement. Our piece on 12 myths about lawsuit loans runs the arithmetic on that one.

When Is the Payoff Actually Made?

Funding is generally repaid from settlement proceeds when the attorney disburses the case funds. Settlement and disbursement can occur on different dates.

After you sign the release, the insurer sends the money to your attorney, the firm resolves the liens, and only then does the office cut the checks. Lien resolution can extend that window, particularly when Medicare or Medicaid reimbursement claims are involved.

The date through which fees continue to accrue depends on the funding agreement. If there is a delay between settlement and disbursement, ask the funder for a written payoff figure and confirm how that period is treated. Our article on how long after a settlement you get your money walks through each step of that timeline.

Ask your attorney’s office to request an updated payoff figure as soon as appropriate so the funding obligation can be addressed during disbursement.

Five Ways to Protect Your Net Check

• Request the minimum amount that solves the problem in front of you.
• Ask whether the agreement caps the total you can ever owe.
• Get a written payoff schedule showing the balance at 6, 12, 24, and 36 months.
• Ask your attorney for a projected net figure before you sign anything.
• Address lien resolution early with your attorney, since any reduction can increase the amount left for you.

A projected net figure can be especially useful. Your attorney may be able to provide a range based on the deductions currently known, which can help you decide how much funding to request.

What Happens to the Payoff If You Lose?

If the case does not result in a recovery, there are no settlement proceeds from which to make the payoff. Under DMS Funding’s non-recourse model, you keep the advance and do not repay it if the case does not recover.

Our guide to what happens if you lose your case explains how non-recourse funding works when a case does not result in a recovery.

How DMS Funding Sizes an Advance

DMS Funding asks about known liens and the expected length of your case before making an offer, because both of those decide what your case can realistically support at the end.

The goal is an amount that addresses your immediate need while taking the potential payoff into account. You can see the range your case may fall into in our post on how much pre-settlement funding you can get, or apply online with no credit check. DMS Funding offers 24–48-hour funding for qualifying cases.

Frequently Asked Questions

How much of my settlement will I actually get?

It depends on the gross recovery and what comes off it: attorney fees, case costs, any medical or government liens, and a funding payoff if you took one. Your attorney can give you a projected net figure once the deductions are known.

Does the payoff come out before or after attorney fees?

The funding payoff is generally handled from settlement proceeds during disbursement, but the exact order depends on the agreements, the type of liens or reimbursement claims involved, and applicable law.

Why is my check less than the settlement amount?

The settlement figure is the gross number. Your check is what is left after the attorney fee, case costs, medical liens, and any funding payoff. Depending on the case, medical or other liens can also substantially reduce the amount left after attorney fees and costs.

Can the payoff exceed my share?

It can happen on a case that settles far below expectations or carries unusually large liens. Ask before signing whether the agreement caps the total and how the company handles a shortfall, and get a projected net figure from your attorney.

Is my settlement taxable?

It depends on what the settlement compensates you for. IRS Publication 4345 explains how different components are treated, and the answer can differ for physical injury, emotional distress, and lost wages. Talk to a tax professional once your numbers are final.

Can I pay the advance off early?

That depends on your agreement. Ask how the payoff is calculated on the date you want to pay and whether there is a minimum charge or a scheduled fee that applies regardless. Some agreements price early payoff attractively, and some do not.

Get a Projected Net Figure Before You Apply

Before you decide how much to request, ask your attorney what your case is likely to net. Then request the amount that closes the gap and no more.

DMS Funding runs no credit check, and you owe nothing if your case does not result in a recovery. See what your case can support.