In 2016, the Volkswagen emissions scandal, better known as Dieselgate, ended with a $14.7 billion settlement. Yet, many car owners who joined the compensation scheme received only $5,000 to $10,000—about 0.000068% of the total payout.
So, where did all those billions go?
The truth is, the settlement’s headline number is almost never what people actually get.
Whether you’re part of a personal injury case or a class action involving thousands of consumers, most settlements are sliced into multiple layers long before the first check goes out.
To see how that process works—and how to make sure you don’t miss your share—this article answers a key question: How is the money distributed when settling a claim? You’ll also find out which factors shape your final payout and what you can do to keep more of the money you’re owed.
Let’s get started.
Key takeaways
- Settlement amounts are rarely what they seem
That big headline number you hear in the news isn’t what claimants actually receive. Whether in a personal injury or class action case, lawyer fees, legal costs, and outstanding debts are deducted before anyone gets paid. - In personal injury cases, multiple parties get paid before you do
From your lawyer’s 33% contingency fee to case costs and medical liens, each step of the payout process reduces the total before you see your net recovery. On average, plaintiffs take home about half of the original settlement. - Class action settlements work differently but follow the same logic
The total fund is approved by a court, legal and administrative costs are deducted, and the remaining money is distributed among eligible claimants. Lead plaintiffs usually receive more, while most class members get smaller, standardized payments. - Taxes, timing, and disputes can further affect your payout
Factors like taxation, structured payments, liens, or even delayed compliance can all influence how much you ultimately receive and when. Understanding these helps you set realistic expectations and avoid surprises. - Technology can help you claim what’s rightfully yours
Platforms like Settlemate automate the discovery and filing process, scanning your inbox for eligible claims, completing forms, and tracking payouts, so you never leave money unclaimed.
How is the money distributed when settling a personal injury claim?
Personal injury cases are one of the easiest ways to see how settlement money moves from the defendant to your bank account. After all, there’s usually one injured person, one claim, and a defined pot of money.
Here’s how that total amount gets reduced, step by step, until it reaches your final payout.
Step 1: Reaching the gross settlement amount
The gross settlement amount is the total sum negotiated or awarded to resolve your claim.
Let’s say you settle for $100,000. It sounds like a big win, but that figure never hits your account directly. Instead, it’s deposited into your lawyer’s trust account, usually an IOLTA (Interest on Lawyers’ Trust Account).
Your lawyer is legally required to safeguard these funds and ensure every dollar is handled properly.
This is also where the settlement distribution process officially begins.
Step 2: Deducting lawyer fees
In a personal injury case, your lawyer usually gets paid first.
Most personal-injury lawyers work on a contingency-fee basis, which means they only get paid if you win or settle your case. In other words, you don’t pay anything up front, and the fee comes out of your settlement.
The fee is usually around 33% of the total settlement. So, in our example, your lawyer receives $33,000 before anything else is paid.
This is the first—and often the biggest—deduction. It’s the cost of turning your claim into a payout.
Step 3: Reimbursing case costs
Winning a case isn’t free.
Your lawyer usually covers dozens of out-of-pocket expenses along the way to build and present your case.
So, the next step is paying those costs back. These often include:
- Court filing fees – the cost of submitting legal documents and motions
- Expert witness fees – specialists paid to testify or analyze evidence
- Medical record retrieval – obtaining certified copies of medical files and reports
- Deposition and transcription costs – recording and transcribing witness statements
- Investigation and discovery expenses – collecting evidence, photos, and statements
Let’s say the total litigation costs in our example come out to $5,000, which is typical for a minor to moderate injury claim.
This leaves $62,000 on the table.
Step 4: Paying outstanding liens
Just like your lawyer covered your case costs, other parties may have paid your bills along the way. Now, it’s their turn to get reimbursed.
These claims are called liens—legal rights that let someone who paid your expenses collect directly from your settlement.
The most common example is a medical lien.
Hospitals, clinics, or ambulance services can delay payment until your case settles, and then recover what they’re owed.
The table below summarizes the other types of liens that can be attached to your settlement:
In some cases, another deduction may apply: pre-settlement funding.
If you took out a loan to cover living or medical expenses while your case was pending, repayment comes directly from your settlement. It’s not technically a lien, but it’s treated the same way during distribution: the funding company gets paid before you do.
In our example, the medical lien is the only one applied, totaling $10,000, which is a typical amount for a minor to moderate injury claim.
After the deduction, the remaining settlement drops to $52,000.
Step 5: Receiving your net payout
Good news: it’s finally your turn.
Before releasing your funds, your lawyer will give you a settlement statement, a line-by-line breakdown showing exactly where every dollar went: fees, costs, liens, and your final payout.
In our example, that’s about $52,000, roughly half of the original settlement.
Once you’ve reviewed and signed the statement, your lawyer sends the final payment, usually by check or wire transfer.
From here, the money is fully yours, whether to cover ongoing expenses, pay off debt, or start rebuilding.
How is the money distributed when settling a class action claim?
When it comes to collective cases like class actions, the rules of distribution change.
The core idea stays the same: the total settlement amount gets reduced by fees, costs, and other obligations.
But this time, the payout doesn’t go to one person, even if a single individual or lead plaintiff started the class action lawsuit. Instead, it’s divided among dozens, hundreds, or even thousands of class members.
Here’s how that process works, step by step.
Step 1: Creating the settlement fund
Once both sides reach an agreement, the judge reviews and approves it to make sure the terms are fair for everyone involved.
After that, the party being sued deposits the full settlement amount into a dedicated fund. This pool of money covers everything: lawyer fees, administrative costs, and payments to everyone who qualifies.
Step 2: Deducting lawyer fees and administrative costs
After fighting for months or even years to reach a settlement, lawyers are the first to get paid.
In class action cases, their fee is typically around 25% of the total settlement, though it can climb to 40% in smaller, more complex, or high-risk cases.
However, these fees don’t go unchecked.
Courts review and cap them to make sure they’re fair and proportionate, protecting class members from losing too much of the fund to legal costs.
Next come the administrative costs—the behind-the-scenes expenses that make large-scale distribution possible, such as:
- Processing claims and verifying eligibility
- Running websites and hotlines for class members
- Printing and mailing claim notices or checks
- Handling banking and transaction fees
Step 3: Determining who qualifies for a payout
In a class action, eligibility depends on the specific criteria set in the settlement, like proof of purchase, product use, or being part of the affected group.
Class members are notified in several ways to make sure no one misses their chance to claim:
- Mailing notices
- Email notifications
- Public announcements
- Dedicated websites
Still, millions of eligible people never claim their shares, usually because they miss the notice or the process feels too complicated.
That’s why you should consider using an automated claim-finding tool: it finds the money you’re owed, files the paperwork for you, and keeps you from missing payouts you’re entitled to.
Step 4: Calculating individual payouts
Once deductions are made, the next step is dividing what’s left among eligible claimants.
But this isn’t as simple as splitting the total evenly. The actual payout depends on how many people file valid claims, who opts out, and the severity of their losses. Fewer people usually mean larger individual checks.
However, there’s also variation within the group.
Lead plaintiffs—the people who filed and represented the class—receive higher compensation for their time, risk, and efforts.
For most class members, though, the payout won’t make any headlines. These payments are smaller and standardized, ranging from a few dollars to several hundred, depending on the settlement’s size and participation rate.
But here’s the thing: those smaller wins can add up fast.
A few class action checks here, a product refund there, and suddenly you’ve recovered hundreds in “found money” you might never have claimed otherwise.
That’s why using Settlemate makes sense.
It lets you automatically join class actions and product refunds, file your claim with zero effort, and get the money you’re already owed. No forms, follow-ups, or fine print.
Factors that might influence your net payout in a settlement
Deductions and the number of participants aren’t the only things that determine your final payout. Other legal, financial, and personal factors can also shape how much ends up in your account.
One of the biggest is taxation.
A common question is: Are class action settlements taxable?
The short answer is: sometimes.
According to the IRS, most personal injury settlements that compensate for physical injuries or illness are not taxable.
However, other types of compensation may be, including:
- Punitive damages meant to punish the defendant rather than reimburse you for losses
- Interest earned on the settlement
- Emotional distress or defamation awards not linked to physical injury
The table below outlines other common circumstances that can affect your net payout:
How to maximize your net payout in a settlement
A few smart moves, both before and during the settlement process, can make a difference in how much money you receive.
Here’s how to make every dollar count:
- Work with experienced personal injury professionals: A lawyer who specializes in settlements can negotiate liens, minimize fees, and ensure every deduction is justified.
- Stay on top of costs: Ask for regular updates on case expenses so you know exactly where your money is going.
- Avoid quick-cash loans: Use pre-settlement funding only if necessary as high interest and fees can eat into your payout fast.
- Automate what you can: Use technology that finds eligible claims, file forms, and tracks progress for you, so you don’t spend extra time or money chasing what’s already yours.
Turn missed settlements into found money with Settlemate
The answer to the question “How is the money distributed when settling a claim?” almost always involves a lawyer. After all, they’re the ones who negotiate the deal, handle the paperwork, and make sure every dollar is accounted for.
In personal injury cases, you need a lawyer to build and win your claim. And in a class action, you need one to file the lawsuit in the first place.
But to join a class action and get your share? No lawyers needed—just a few taps on your phone.
Settlemate makes claiming your share effortless by:
- Finding every claim you qualify for: Settlemate scans your inbox and receipts to uncover class actions, recalls, and refund opportunities you might’ve missed.
- Filing automatically: The app fills and submits all your claims for you.
- Showing your payouts: You can see every claim’s status, estimate, and deadline in real time.
Download Settlemate on iOS or Android to start claiming what’s yours today.
FAQ
How does settlement payment work?
Once the total settlement is agreed on, it’s first sent to your lawyer’s trust account. From there, legal fees and case costs are deducted before you receive your final payout.
What’s the most a lawyer can take from a settlement?
In most cases, a lawyer can take about 40% of your total settlement at most.
Who pays legal fees in a settlement?
In most cases, you do, but not up front. Your lawyer’s fee is deducted from the settlement amount before the rest is distributed to you.
