Can an attorney take their fees before payments are made?

Texas -

Background - civil case - 92 plaintiffs, defendants filed bankruptcy, case settled in bankruptcy court chapter 11.

Just got letter today with settlement amount to be paid out in 6 payments one in April one in September for three years. Note from attorney says

"Our expenses may be deducted from the first payment"

They are charging 33 % of the final payout for each plaintiff, so payments divided by 6 don't even cover what attorney's fees are! Can they take our full payments until they are paid? that would have most of us not receiving any compensation until the third or fourth payment, so another year and a half or so!

Have left word with attorney but don't expect to hear from them any time soon as I usually don't.

Also - any idea on taxes on such a settlement? Is it taxed prior to attorney's fees or after fees are taken out? Each payment or payment as a whole over the three years?

Thanks for any info!

What does your fee agreement say?

The settlement may be taxed like an installment contract, but check with a CPA on that issue. You could, of course, deduct the attorney's fees.

azatty said:

What does your fee agreement say?

The settlement may be taxed like an installment contract, but check with a CPA on that issue. You could, of course, deduct the attorney's fees.

Click to expand...

I agree and will add that I will just bet you that the fee agreement says the lawyers get paid first.

Post back with results.

thank you....the original fee agreement was for 40% of a settlement, when the defendants filed bankruptcy the settlement was of course a CONSIDERABLY lower amount than the original settlements we thought we would receive...so to be nice, the attorney lowered his fees to 33%. There hasn't been any binding contract I signed other than the original fee agreement almost 6 years ago, only emails and letter stating the attorney would take only 33% now. I'll have to look back through my records and see what I can find.

any portion of the settlement for loss of earnings/wages?

yes, it is punitive and compensatory damages for abuse suffered, mental, physical, sexual. Don't know how that plays out though once they filed bankruptcy and it went into those courts for reorganization. We just became another claimant I think, so punitive/compensatory damages don't really matter anymore do they?

i know that payment for loss of earnings and loss of future earnings are taxable.

Having recently looked into this issue:

Assume everything is taxable. the attorney fees may be subtracted for tax purposes, because that was an expense of earning the income in question.

Then you can subtract from the taxable amount monies earned for physical injury. That includes pain and suffering, to the extent it is a physical injury.

This is a tricky issue, and, without knowing what you sued for, it is almost impossible to give you good advice.

update:

Just spoke to attorney and attorneys fees are taken out of every check we receive in the amount of 33% PLUS expenses are taken out before we ever receive our checks.
So...expenses first off the top, then attorney's fees, then maybe someday....we get a buck or two?
And attorney said the damages are for abuses suffered and referred me back to an accountant for how it is taxed.

Thank you for your responses!