Approaches To Lawsuit Settlement

Lawsuit settlements refer to the monetary agreement between a plaintiff and the defendant so as to avoid the hassles associated with lengthy and expensive court proceedings. In the legal parlance, there are two approaches to monetary settlement. These are called: structured settlement approach and lump sum settlement approach.

Structured settlement is a court order in which the defendant offers a specific sum of money to the claimant over a period of time on the basis of the injury claims. On the contrary, in a lump sum settlement, the defendant pays the entire amount to the claimant through a single payment approach. Both the approaches have their advantages and disadvantages. Lets us examine each of these approaches.

Structured lawsuit settlement

In structured settlement approach, the defendant pays the amount to the claimant through a series of installments. Earlier, there were no organized method to settle court dispute and the claimant was often disillusioned by the amount paid to him after the settlement. From that point of view, this is a highly beneficial method which involves a statutory obligation over a time frame.

There are several benefits of structured lawsuit settlement. One key benefit is that it is not mandatory for the claimant to pay taxes. At the same time, he feels monetarily secured as the money is offered to over a specific period of time. This is as good as having a regular source of income. Moreover, the amount can be used by the claimant in settling other financial obligations including some debts or personal loans etc.

Lump sum lawsuit settlement

In a lump sum settlement approach, the defendant offers the entire amount to the claimant as against structured settlement, where the money is given over a specific period of time. There have been cases when structured settlement proved to be quite ineffective. This is especially true under some circumstances when the claimant has a huge amount of loans to repay, when he has plans to purchase an expensive commodity, say a home or a car or wishes to invest in some income-generating pursuit say, starting a new venture. Many people also prefer to keep the money in the bank in order to get their monthly and quarterly interest.

At the same time, lump sum approach is a risky deal especially if you are a spendthrift. Often times, people use up the entire amount on various pursuits as part of human behaviour. It is also obvious that in this kind of settlement the amount paid is much lesser than structured settlement. Oftentimes, it do not even come close to the damage occurred. Finally these are taxable, as these are obtained in bulk.

Whatever be the settlement approach, it is always best to discuss the pros and cons with your attorney, as he will guide you with the best deals.