If you’re in a car accident, then expect your finances to be different afterward. You might have considerably more money than you had before. You may have less.
If you have less money, then that means the law determined that what happened was your fault. If you have more, then it was the other driver’s fault.
If you get money from the accident, you’re probably going to be glad to have it. It might pay for things like physical therapy if you’re injured, or medical bills. It may pay for your pain and suffering, or it might make up some income while you’re off work recovering.
Here are ways that a car accident settlement can impact your finances.
You Might Have to Declare Bankruptcy
As you’re figuring out where your finances will be following a car accident, remember that much depends on how good the lawyer you hired is. An excellent car accident attorney:
- Might get the judgment against you reduced if what happened was your fault
- Could successfully argue that what happened wasn’t your fault at all
If you clearly broke a traffic law, you can expect to be paying at least some money to the other driver if your insurance didn’t cover everything.
In worst-case scenarios, you might have to declare bankruptcy. That could happen if you owe a huge settlement, and there’s no way for you to pay it. The most likely reason might be if you severely injured or even killed someone.
You May Have to Liquidate Your Assets
You might also have to liquidate any financial assets you have to pay the judgment against you. That may include:
- Any CDs that you have
- Money in a 401K
- Any cash in a savings or checking account
- Selling off any stocks or bonds
Even if you have a great lawyer, they probably can’t protect you very much if you seriously hurt or killed someone. You have to make financial recompense. It could leave you with almost nothing afterward.
You Might Have Your Wages Garnished
If you can’t pay everything you owe all at once, you might also have to get your wages garnished. This is where the court mandates that part of your salary each week or month goes to the car accident victim or victims.
They will probably only leave you what you need to live on, and no more. You’re not going to be able to save any money back up or diversify until you’ve paid the judgment.
This is probably going to be frustrating for you, but you have to square things with your victims.
You Might Have to Get a Loan
Another option if you need money after a car accident is to approach a bank or credit union about a loan. If you do that, then you might have to put up your house, other valuable property, or possessions as collateral.
You could also approach family members or friends and try to borrow the money from them if you know anyone who has it. That’s not an ideal solution, but these are probably desperate times for you.
You May Have a Lot More Money than You Used to Have
Of course, it also could turn out that the accident was the other driver’s fault. Then, they’ll have to pay a settlement to you.
You’ll need to pay your lawyer with part of it. We already mentioned how you might also have to use some more of it for things like medical bills, physical therapy, medication, etc.
If you have money left over, though, there are many options open to you. You might get a new vehicle if you totaled the one from the accident. You could also invest in the stock market.
You might decide that you’re in the right financial shape to take a vacation with the money. Perhaps you’ll start a college fund for your kids or get some renovations done on your house.
Logic dictates that you should do something responsible with this unexpected windfall, but that’s entirely up to you. You might feel like, after this unfortunate incident that happened, you’re due to get yourself something frivolous. There’s nothing necessarily wrong with that.
Whether you end up with more money or less after an accident, you probably hope that it never happens again in either scenario. Whether it was your fault or the other driver’s, car accidents are traumatic, and nothing you want to go through more than once.
