Settlement disbursement is the last step of a personal injury case. The firm pays the settlement out of its trust account to everyone owed a share: its fee and case costs, medical providers, lien holders and the client, all from client money held under strict trust account rules. Hona builds software for this step: Hona Disbursements, powered by Confido Legal, pays clients, medical providers, lien holders, expert witnesses and any other third party on the case electronically from the firm's trust account.
How does a personal injury settlement get disbursed?
Agreeing on a number does not end the case. Six steps follow.
- Release and payment. The client signs a release, and the insurer pays once it has the signed paperwork. Some states set deadlines. In New York, a settling defendant generally must pay within 21 days of receiving the signed release and stipulation of discontinuance (CPLR 5003-a). In Florida, the insurer must pay within 20 days of a written settlement unless the agreement sets another date (Fla. Stat. 627.4265). Settlements for minors need extra steps. In New York, for example, a court approves the settlement and the attorney's fee (CPLR 1207). The child's money then goes to a guardian, a bank account that releases funds only on court order, or a structured settlement (CPLR 1206).
- Funds land in trust and clear. The check or wire goes into the firm's trust account, often an IOLTA. Under ABA Model Rule 1.15, the firm must promptly tell the client and anyone else with an interest that the money has arrived. Some states bar paying out against a deposit until it has cleared, with limited exceptions. South Carolina, for example, treats an ACH deposit as uncollected for five banking days (Ethics Advisory Opinion 12-11).
- Liens are confirmed. Anyone who paid for the client's care may have a claim on the settlement: health insurers, hospitals, Medicare, Medicaid and providers who treated on a lien or a letter of protection. The firm confirms the final amount owed on each and negotiates reductions where it can.
- The settlement statement. In a contingency case, the client gets a written statement of the outcome, their share and how it was worked out (ABA Model Rule 1.5(c)). It shows what came in, what is paid out in fees, costs and liens, and what is left for the client, and most lawyers have the client sign it. Some firms walk the client through it at a settlement meeting.
- Payouts. The firm then pays everyone from trust: its fee, case costs, each provider and lien holder, and the client. Each payment is a check or an electronic transfer, depending on the firm and the state's rules.
- Reconcile and close. The firm records each payment against the client's ledger, confirms each check or transfer cleared, reconciles the trust account and closes the file.
Collecting from an insurer commonly takes 30 to 60 days after a settlement, and liens can add more. Firms tell us "where's my money?" calls are common at the end of a case, and that clients want their money quickly.
Where does settlement disbursement break down?
Liens hold up the final numbers
Each lien has to be paid, or its claimed amount held in trust, before that money can go to the client. Some come with hard deadlines. When Medicare paid for the client's care, it must be repaid within 60 days and can charge interest after that. If it is not repaid, Medicare can recover from the attorney who received the settlement, not just the client (42 CFR 411.24). A lien number that arrives late holds up the final statement. It does not have to hold up the client's whole share: under ABA Model Rule 1.15(e), the firm keeps the disputed amount in trust and promptly pays out the rest.
Paper checks are slow and manual
With paper checks, the payout is often the most manual step of the case. Someone prints and signs a check for the client and for each provider, mails it or waits for the client to come in, then tracks which checks cleared. Firms tell us about paying to overnight checks, needing someone in the office just to print, and provider checks that sit uncashed and muddy the trust reconciliation.
Checks get stolen and altered
Financial institutions filed more than 680,000 suspicious activity reports for check fraud in 2022, nearly double the year before. FinCEN warned that stolen checks get "washed" with new payees and amounts (FinCEN Alert FIN-2023-Alert003). In the Association for Financial Professionals' 2026 survey, checks were the most targeted payment method, cited by 58% of respondents (AFP). The federal government is moving off paper checks too. Its reason: Treasury checks are historically 16 times more likely than electronic transfers to be reported lost or stolen, returned undeliverable or altered (Executive Order 14247).
Electronic payments carry risk too. ACH debits were the second most targeted method in the AFP survey, at 30%. That fraud pulls money out of your own account, so keep your bank's ACH debit filter on and authorize only the payment companies you use. For every electronic payout, require approval before release and verify each payee.
Not every client has a bank account
About 4.2% of U.S. households had no bank account in 2023 (FDIC). New York's bar ethics committee has said a lawyer may pay a client on a fully loaded prepaid debit card. The lawyer should first explain the payment options and what each costs the client (NYSBA Opinion 1109). Keep a check process as the fallback for clients who want one.
Can a law firm pay settlement funds electronically from a trust account?
Generally yes, but the methods allowed and the safeguards required vary by state. This is not legal advice, so check your own state's current rule.
- The ABA model. The ABA Model Rules on Client Trust Account Records allow trust withdrawals by check to a named payee "or by authorized electronic transfer" (Rule 2(c)). Each state adopts its own version.
- New York allows a trust payment by bank transfer with the prior written approval of the person entitled to the funds. Opinion 1281 (2025) adds that only a lawyer who is a signatory on the trust account can start the payment.
- New Jersey (as of October 2026). The state bar association said in an October 2025 letter that Court Rule 1:21-6 has been read to bar electronic transfers out of trust other than wires. It asked the state Supreme Court to allow ACH and EFT withdrawals.
- South Carolina concluded in 2025 that paying a federal agency's medical lien from trust by authorized ACH debit through Pay.gov does not violate its rules (EAO 25-01). The lawyer must monitor the account, reconcile monthly and keep records.
What does a good settlement disbursement process look like?
Run the same short checklist on every settled case.
- Get consent early. Put consent to electronic payment in the engagement agreement and again in the settlement paperwork.
- Start on liens before the case settles. Request final amounts in writing. If one is still open at payout, hold the full claimed amount in trust and pay the client the rest.
- Confirm the funds have cleared and give the client the written statement first.
- Separate preparing a payout from releasing it. Give release authority only to the people your state allows to authorize trust withdrawals.
- Verify every payee. Let clients enter their own bank details on a secure page. Never take account numbers over the phone, and confirm any change in payment instructions through a number you already have.
- Offer a choice of payment methods, and explain what each one costs the client.
- Make every payout traceable. One payout per payee, recorded to the client's ledger with who approved it, when it was paid and a unique ID.
- Tell the client where the money is at each step, before they have to call.
The metrics to watch
| Metric | The question it answers | A healthy sign |
|---|---|---|
| Release to funds | How long from the signed release to the settlement money landing in trust? | Inside your state's payment deadline, and anything late gets chased. |
| Funds to client | How long from cleared funds in trust to the client being paid? | Days, not weeks. |
| Open liens on settled cases | How many settled cases are waiting on a lien amount? | Few, and each has a next step and a date. |
| Outstanding checks | How many payouts have not been cashed or deposited? | None more than a few weeks old. |
| Payment calls | How often do clients call to ask where their money is? | Rarely, because updates reach them first. |
| Reconciliation exceptions | How many items fail to match when you reconcile trust? | Zero. |
How does Hona help with settlement disbursements?
With Hona, your team drafts the payout on the case, where it already works with the client. Confido Legal moves the money, and Hona never holds funds.
| The problem | How Hona helps |
|---|---|
| Checks to print, sign and mail | Your client gets a secure link by text from your firm's number and chooses an instant payout to a debit card or free direct deposit. |
| Stolen, washed or lost checks | No check in the mail. Your client verifies their identity and enters their own bank or card details, and the name on the account is matched before money moves. |
| Releasing trust money safely | Nothing goes out until someone your firm authorizes approves it, and a client payout also waits for the client to verify and accept. |
| "Where's my money?" calls | Payout status shows on the case, so anyone working the case can answer, and your client gets a text as the payment moves. |
| Paying everyone else on the case | Pay any lien holder or third party on the case from the same place as the client: medical providers, expert witnesses, co-counsel and other vendors. |
| Records for reconciliation | Each payout is its own debit, tied to one client and one matter, and every step is logged with a name and a timestamp. |
Firms tell us the approval workflow, identity checks and audit trail are what reassure whoever owns the trust account.
The payout is the last step of a client relationship Hona supports from the first call. The same platform sends case updates by text and runs two-way texting. Lia, Hona's AI case agent, keeps clients in treatment and works provider offices for records and bills, and the AI Receptionist answers calls. Hona works alongside your case management system and trust accounting: your team still prepares the settlement statement, and Hona gets the money out. For the rest of the client side, read how to choose client communication software and how the main client communication tools compare, including which ones also handle settlement payouts.
Frequently asked questions
How long does it take to get paid after a personal injury settlement?
It depends on the state, the insurer and the liens, but collecting from an insurer commonly takes 30 to 60 days after a settlement. Some states set deadlines, such as New York (generally 21 days after the defendant receives the signed release and stipulation) and Florida (20 days after a written settlement, unless the agreement sets another date). Open liens and check clearing can add time before the firm pays the client.
What comes out of a personal injury settlement before the client is paid?
Usually the attorney's fee, case costs the firm advanced, and liens from anyone who paid for the client's care, such as health insurers, hospitals, Medicare, Medicaid and providers who treated under a letter of protection. Each lien is paid, or its claimed amount held in trust until it is final, and the client can be paid the undisputed rest. The written settlement statement shows each deduction and what is left for the client.
Can a law firm pay settlement funds electronically from its trust (IOLTA) account?
Generally yes, but the methods allowed and the safeguards required vary by state. The ABA's model trust account records rule allows withdrawals by authorized electronic transfer, and New York allows trust payments by bank transfer with the prior written approval of the person entitled to the funds. As of October 2026, New Jersey's rule has been read to allow wires but not ACH, so check your own state's current rule; this is not legal advice.
What is a settlement statement in a personal injury case?
It is the written statement a contingency-fee lawyer must give the client at the end of the case under ABA Model Rule 1.5(c) and the state rules based on it. It shows what came in, the fee, costs and liens paid out, and what is left for the client. Most lawyers have the client sign it.
How can a firm pay a settlement to a client who has no bank account?
A prepaid debit card is one option: New York's bar ethics committee has said a lawyer may pay a client on a fully loaded prepaid debit card after explaining the options and what each costs. About 4.2% of U.S. households had no bank account in 2023, so keep a check process as the fallback for clients who want one.
What software helps personal injury firms pay out settlements electronically?
Firms use their bank's ACH or wire transfers, payment platforms built for law firm trust accounts, or payouts built into case management or client communication software. These often sit alongside a trust accounting tool that produces the settlement statement. Hona Disbursements, powered by Confido Legal, pays clients and any lien holder or third party on the case, such as medical providers and expert witnesses, from trust, inside the same platform Hona firms use to text their clients.
How does Hona Disbursements protect a firm's trust account?
Nothing goes out until someone your firm authorizes approves it, and a client payout also waits until the client verifies their identity and accepts. Each payout is its own debit, every step is logged with a name and a timestamp, and Confido Legal moves the money, so Hona never holds funds.
See how a settlement payout works on one of your cases. Book a demo.
