What a Lien on a Personal Injury Settlement Means and How It Can Affect Your Recovery

Short answer: A lien is a legal claim by a third party—such as a health insurer, a medical provider, or a government benefit program—against money you recover in a personal injury claim. Liens can reduce the amount you actually receive from a settlement or judgment unless they are paid, negotiated down, or otherwise resolved before distribution.

Detailed answer — what a lien is, the common types, and how they work

A lien is a legal right to be paid from proceeds of a lawsuit or settlement before those proceeds go to the injured person. Liens arise in different ways:

• Health insurer subrogation or reimbursement claims. Private health insurers and ERISA-governed employer plans commonly assert a right to be reimbursed for medical expenses they paid that relate to your injury. ERISA plans can pursue reimbursement under federal law (see 29 U.S.C. §1132). These plans often have written plan terms that require reimbursement from third-party recoveries.
• Medicare and Medicaid (public benefit) recovery. Federal law gives Medicare and Medicaid strong recovery and subrogation rights when those programs paid for treatment related to a person’s injury. Medicare’s recovery authority is governed by federal Medicare secondary payer rules (see 42 U.S.C. §1395y(b)) and by CMS procedures for conditional payments. State Medicaid programs also seek repayment from third-party recoveries under federal and state law. These programs frequently require timely notice and may demand repayment from settlement proceeds.
• Medical provider or hospital liens. In some states providers can use contract rights, statutory liens, or equitable liens to secure payment out of a settlement. Where a provider lacks a statutory lien, it may pursue payment through an equitable lien or an account stated claim. The strength and priority of these claims vary by jurisdiction.
• Attorney charging liens and judgment liens. Your attorney may have a charging lien (a claim against proceeds for unpaid fees) or the court can enter a judgment that becomes a lien on assets. Most personal injury attorneys use contingency-fee arrangements and seek their fee directly from the settlement funds through the requirements of the fee agreement.
• Other creditors or parties with judgments. If other parties have valid judgments or liens that attach to your assets, those creditors might assert claims against settlement proceeds in some circumstances.

How a lien can affect the money you get

Liens can reduce or sometimes eliminate your net recovery in several ways:

• Direct reduction: If a lien is valid and has priority, the lienholder is paid out of the settlement before you receive anything.
• Negotiation pressure: Lienholders often demand full payoff up front. If you or your attorney do not negotiate, the lienholder may accept less only after you threaten or take legal action.
• Costs and delays: Disputes over liens can delay settlement distribution and may add legal fees to resolve the dispute.
• Settlement structure changes: You may need to structure the settlement (e.g., allocate amounts among damages categories, use a structured settlement, or hold funds in escrow) to address lien obligations.

Typical hypothetical showing the effect

Hypothetical: You settle a car crash claim for $100,000. Your health insurer paid $30,000 in medical bills and asserts a contractual reimbursement right. Medicare paid $10,000 and has conditional payment claims. Your attorney’s contingency fee is 33% (about $33,000) plus costs. If all lien claims are enforced in full, available money to you could be reduced to little or nothing after paying the insurer, Medicare, attorney fees, and litigation costs. If your attorney successfully negotiates insurer reimbursement down to $10,000 and resolves Medicare conditional payments to $5,000, your net recovery increases substantially.

Important steps to protect your recovery

1. Inventory potential lienholders early. Make a list of everyone who paid or might pay for your injury-related care (private insurers, Medicare, Medicaid, hospitals, doctors).
2. Notify public benefit programs promptly. If Medicare or Medicaid may have paid for care, notify the program and your lawyer early. Medicare requires identification of pending claims and may issue a conditional payment demand. Failing to follow Medicare or Medicaid procedures can increase what they demand later.
3. Ask for lien documentation and demand statements. Get written proof of each lien: plan provisions, explanation of benefits showing payments, conditional payment letters from Medicare, or hospital billings and asserted liens.
4. Challenge unclear or inflated liens. Liens are often negotiable. Insurers and providers commonly accept reduced payoffs. Ask for itemized bills and proof the treatment related to your injury. If a provider’s charge is unrelated or excessive, challenge it.
5. Negotiate or litigate disputed liens. Your attorney can negotiate reductions, offset liens against claims for pain and suffering, or litigate invalid lien claims. ERISA-plan subrogation claims and public benefits have special legal rules that affect negotiation and litigation strategy.
6. Use settlement structure tools. Consider escrow/holdback, structured settlement annuities, or special needs trusts (if you received public benefits) to protect future eligibility and secure lien resolution.
7. Make sure the settlement order or release addresses liens. Ask for lien releases or payoff letters in writing before final distribution. Courts can sometimes approve payoffs from escrow or order distribution that protects you from later claims.

Special rules that often matter

• ERISA plans: ERISA-governed plans often have strong contractual reimbursement rights and access to federal court for enforcement (29 U.S.C. §1132). Plan terms control whether the plan seeks reimbursement and whether the plan allows reduction for attorney fees or case-specific circumstances.
• Medicare: Medicare’s recovery rules can require repayment of conditional payments out of a settlement. Medicare’s recovery process is governed by federal law (see 42 U.S.C. §1395y(b)) and implementing CMS procedures. Your lawyer should submit a conditional payment inquiry early and obtain a demand or conditional payment amount from CMS so you can negotiate or reserve funds before closing.
• Medicaid and state programs: State Medicaid programs can pursue recovery from your settlement. Those rules vary by state and may include estate recovery for certain beneficiaries after death.

Practical tips for New Hampshire claimants

While lien law varies by claim and by the specific lienholder, these New Hampshire-focused practical points help most clients:

• Start lien checks as soon as you file a claim or start settlement talks. Early identification reduces surprises at closing.
• If Medicare or New Hampshire Medicaid (NH Medicaid) may be involved, treat those programs as high priority—follow their notice and documentation processes to reduce later demands.
• Ask your attorney to obtain written payoff figures from each lienholder. Avoid relying on oral assurances.
• Consider holding disputed lien amounts in escrow or obtaining a court order allocating settlement funds if a lien dispute would delay distribution.

When to consult an attorney

Talk to an experienced personal injury lawyer early if you face any of the following: multiple lienholders, Medicare/Medicaid involvement, ERISA-plan reimbursement claims, hospital liens, or significant medical bills. A lawyer will help identify lien priorities, obtain payoff figures, negotiate reductions, and structure the settlement to maximize your net recovery.

Helpful Hints

• Document everything: keep copies of bills, Explanation of Benefits (EOBs), letters from insurers, and any payoff statements.
• Do not sign a full release or accept a final payment until liens are resolved or properly reserved for.
• Get written releases or payoff letters from lienholders whenever possible.
• Medicare conditional payments can be challenged — request itemized records and dispute charges that don’t relate to your injury.
• Negotiation often reduces lien amounts; don’t assume a lienholder will demand the full billed amount.
• Consider whether a special needs trust or structured settlement is appropriate if you receive public benefits and need to protect eligibility.

Disclaimer: This article explains common legal concepts about liens on personal injury settlements but is not legal advice. Laws change and every case is different. For advice about your specific situation under New Hampshire law, consult a licensed New Hampshire attorney who handles personal injury and lien/subrogation matters.