The Settlement Check Delivery Process Explained

How Are Settlement Checks Mailed?

Settlement checks are a common way for legal disputes to be resolved outside of court. These checks are issued as payment when two parties settle a case through negotiation rather than going through an lengthy court trial. Settlement checks might be paid out for class action lawsuits, personal injury claims, employment discrimination cases, and more. But how exactly are these settlement payments delivered?

When most people think of receiving important mail, they imagine a signature-required letter sent by certified mail. However, standard settlement checks are not sent through any kind of tracked or certified mail service. They are simply mailed in a standard business envelope via first class U.S. mail.

This means recipients do not receive notifications of when the check is being sent or have the ability to track its delivery status. Settlement checks could be lost or delayed just like any other piece of mail.

Who Issues Settlement Checks?

Settlement checks are typically issued by the defendant’s insurance company or legal defense team in a case. For example, if a plaintiff sues a company for injuries related to using a product, that company’s liability insurance provider would provide the settlement check. Or if someone sues their employer for workplace discrimination, the company’s legal counsel may issue payment.

In class action lawsuits with multiple plaintiffs, a settlement administrator may be hired to manage issuing checks. The administrator works as a third-party to verify identities and eligibility and distribute payments. However, the check itself would still come directly from the defendant’s insurer or lawyers.

The settlement agreement and approval process impacts the timing. Checks aren’t simply written as soon as both parties say they want to settle. Even if an initial settlement is agreed upon, there is a process around finalizing terms and getting court approval. Once everything is official, checks can take weeks or even a couple months to be mailed out.

What Information Will Be on a Settlement Check?

When your settlement check arrives, you’ll want to review it closely to ensure everything is in order before depositing. Here are some key details to look for:

  • The check will be addressed to your name. Make sure it is spelled correctly and matches your identification.
  • There will likely be a case number, claim number, or matter name on the check, helping you identify what settlement it is paying.
  • The amount paid will be written out in text to match the numerical dollar amount. Verify these amounts match what you were expecting to receive based on the settlement terms.
  • The check will have a “stale date” listed, which is usually 90 days from the issue date. The bank will not accept checks deposited after this date.
  • The check may say “Final Settlement” or other language indicating it is a one-time payment resolving the case.

As with any check, be sure to double check for any errors before cashing. Notify the issuer as soon as possible if any name, date, or amount looks incorrect. Your settlement agreement should outline the process if checks need to be reissued due to errors.

Do Settlement Checks Expire or Become Invalid?

You will want to deposit or cash your settlement check promptly, as checks that are lost, stolen, or become stale will often not be reissued. The stale date, usually 90 days from when the check was issued, indicates when it is no longer valid.

If something were to happen to your check, you typically must provide proof within that 90 day window to have a replacement sent. This can include filing a lost check affidavit or police report if it was stolen.

But if too much time has passed or you don’t have evidence of what happened, the check issuer is unlikely to replace it. That’s why it’s important to stay on top of your mail and process settlement payments very promptly. Don’t let your hard-won check sit around undeposited any longer than necessary.

How Will Taxes be Handled on My Settlement?

One important consideration with your settlement check is whether taxes will need to be paid. For most types of lawsuit settlements, taxes are not automatically withheld from the payment like with a typical paycheck. The recipient is responsible for properly reporting and paying applicable taxes later when filing returns.

There are some exceptions, like workers compensation and physical injury claims, where part or all of the settlement may not be taxable. Plaintiffs should consult with their lawyer or accountant to understand if taxes apply and estimate how much may need to be set aside or paid when filing taxes the year the payment is received.

While getting a big check can be exciting, don’t let the tax obligations later take you by surprise. Make sure you are aware of any tax impacts when negotiating your settlement so your final payment amount meets your needs.

I Never Received My Settlement Check – What Can I Do?

Given that these checks are not sent via certified mail with delivery tracking, they do unfortunately sometimes get lost or go to an incorrect address. If you know a settlement payment is on the way but never arrives, you should act quickly and contact the issuer.

Be prepared to provide documentation like a lost check affidavit stating you never received the check. It also helps to proactively update your address before checks are mailed if you know you are expecting settlement payments.

Providing prompt notice, ideally within that check stale date window, is important for getting the situation remedied. The longer you wait to report issues, the less likely replacement checks will be provided. Depending on the settlement agreement terms, you may lose your right to payment if you do not act quickly when problems arise.

How Should I Cash a Settlement Check?

Once you safely receive your settlement check, you’ll need to decide the most appropriate way to handle or cash it. Here are some options to consider:

Deposit into your bank account – For moderate or larger sized checks, depositing directly into your bank account can be the easiest route. Be aware that banks will often place temporary holds on large check deposits, so the funds may not be immediately available.

Cash at your bank – If it is a smaller check or you need immediate access to the cash, you can go directly to your bank to cash it. They will be able to verify the check is legitimate. Just be aware that deposited checks always leave a paper trail, while cash does not.

Use a check cashing store – If you do not have a bank account, you may be able to cash settlement checks at a check cashing business, grocery store, or other location that offers this service. Just know the business will take a processing fee off the top for providing this instant access to cash.

When negotiating your settlement, think about the form you would like your payment in – such as a traditional paper check, an electronic transfer, or even structured payments over time. This can allow you to select the most useful payment method for your needs.

Settling Legal Disputes Outside of Court

Lawsuits and legal claims can be long, draining affairs. The discovery process of collecting evidence for trial can drag on for months or years. Even once a court judgement is secured, collecting payment is not always guaranteed.

That’s why many plaintiffs and defendants eventually seek to settle cases out of court when the option is available. Settlement agreements allow both sides to avoid the expense and uncertainty of a trial. Payments can be obtained faster through settlements compared to drawn-out court litigation.

But there are certainly pros and cons to settling that should be weighed. You may not end up with as much compensation as you had hoped for. Or you may feel like key facts did not get a chance to be aired in a public trial. An experienced lawyer can advise clients on whether accepting a settlement or continuing to trial is the better strategic choice in different scenarios.

In sum, opting for a settlement is not the right decision in every dispute. But when it is in your best interest to resolve through a settlement agreement, make sure you closely follow the process of receiving your payment. Don’t let that hard-earned check go missing due to lack of attentiveness. Pay close attention to the mailing details, timelines, and requirements around depositing settlement checks.

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