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Crowdfunding and Personal Injury Claims

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May 13, 2024

If you need hospital treatment for injuries after an accident, your medical bills could soon start mounting up. The National Safety Council (NSC) estimated that in 2022, a disabling car accident would cost $162,000 in medical and other expenses, with less serious but evident injuries costing $42,000. Of course, these are just averages – the real cost of catastrophic injuries could be much greater.

If your accident was caused by someone else’s negligence, you have the right to file a lawsuit and seek compensation to cover your losses, such as medical expenses and lost earnings. However, to get quicker access to financial support and help alleviate this potentially crushing financial burden, some personal injury victims are turning to crowdfunding. 

Join us as we take a deep dive into whether crowdfunding is the best way to reduce the financial burden of a personal injury claim. We will also explore whether receiving crowdfunding donations could impact your final settlement and how personal injury lawyers can provide the advice you need.

Defining Crowdfunding

Crowdfunding is the process of gathering a number of small donations from different people to contribute to a common fund. It is sometimes used to fund new business ventures. The funds raised can also be used to provide financial support to families and individuals who are going through a hard time due to sickness, injuries, or bereavement.

Expenses crowdfunding can cover

Many people set up a crowdfunding campaign to help them pay for specific expenses, which may include:

  •  Medical bills
  •  Transportation costs
  •  Lost wages
  •  Funeral expenses

Some individuals also request funds for attorney fees. However, although personal injury attorneys charge fees for their work, most represent their clients on a contingency basis. This means that there are no upfront fees to pay, and you will only pay if the attorney wins your case or secures a settlement for you.

While crowdfunding campaigns are set up with the best of intentions and address real financial needs, it is important to consider the legal and tax implications of raising funds this way. 

Crowdfunding options

People use several crowdfunding platforms, the largest and most well-known of which is GoFundMe. A personal injury victim may choose to open a GoFundMe account and set up a campaign to raise funds for him or herself, or a friend or family member may set up a GoFundMe campaign on his or her behalf.

There is no denying that using a crowdfunding platform could quickly generate funds to help defray some of your medical expenses. While this may seem like a low-risk and easy way of raising money, there are pros and potentially serious cons to consider before launching a campaign.

The Benefits of Crowdfunding for a Personal Injury

The undeniable benefit of crowdfunding is its worldwide reach. It potentially gives you access to every internet user on the planet. If your campaign attracts a lot of attention, you may start to receive a flurry of small donations that could potentially form a sizable payout.

Get funds fast

Another benefit is that once you achieve your fundraising goal, the money may be paid out within a short amount of time. This could help you quickly cover some of your expenses before running up huge interest costs. Even if you do not reach your goal, you should still be able to withdraw the funds in accordance with the crowdfunding platform’s regulations.

Raise awareness

Personal injuries cause more than just a financial burden. The accompanying pain and physical limitations can make it hard to handle the tasks of daily living, such as taking care of your home and children. A crowdfunding platform may be a good way to raise community awareness of your needs. 

Collateral source doctrine protections

According to Georgia’s collateral source rule, a defendant’s attorney may present evidence of crowdfunding donations which you obtained for your medical or other expenses. 

However, even if you have already received financial support for your losses, the defendant’s liability and the damages you are entitled to may remain the same.

These benefits may make crowdfunding sound like an attractive way to tide yourself over until you hopefully receive compensation. However, funds received from a crowdfunding campaign could inadvertently complicate a personal injury claim in ways you may not have anticipated.

The Downsides of Crowdfunding for a Personal Injury

During the litigation process, both sides may go through your life with a fine-tooth comb. If you have solicited funds after a personal injury through a crowdfunding platform, this is very likely to come to light. Depending on the nature of your campaign and how much money you raise, your crowdfunding could potentially affect the outcome of your legal action.

Not hitting the target

Crowdfunding campaigns may start with a wave of excitement, followed by a flurry of donations. However, it can be difficult to keep that momentum going. You may find that you are not able to raise the funds you had hoped you would and still be left with major medical and other costs to cover.

If you have suffered a catastrophic injury, sadly, the initial medical treatment you receive will likely be just the start. You may require further surgeries or therapies to help you reach maximum medical recovery. You may also need caretaker support, adaptations to your home, and ongoing physical therapy.

Even if you reach your crowdfunding goal, it is unlikely that you will be able to cover all these costs in the long run. Instead, you are more likely to achieve the payout you need through a personal injury claim or lawsuit.

Personal injury lawyers take a long-term view of your condition. Attorneys may work with expert witnesses who can assess the impact of your accident on the rest of your life. 

A lawyer may be able to help you achieve a settlement that takes into account non-economic losses such as:

  • Pain and suffering
  • Loss of enjoyment in life
  • Loss of ability to enjoy a normal marital relationship

Social media scrutiny

A personal injury attorney usually advises his or her clients to be very careful about everything they post on social media during a personal injury claim. The other litigants may examine your social media posts on Facebook, Instagram, and crowdfunding platforms, looking for discrepancies that may undermine your claim. 

Crowdfunding campaigns often include a heartfelt, personal account of your accident and a comments section. The goal of crowdfunding is to raise funds, so you may have used emotional language to describe your suffering to encourage people to donate. You may also provide updates on your condition in the comments section.

The legal risk, though, is that unguarded comments made on a crowdfunding platform could be used against you later. The defendant’s legal team likely will check your posts regularly, looking for information that could be used to reduce or deny your settlement offer. 

While the funds you have received cannot be used against you, at trial, the defendant’s lawyers may use the crowdfunding campaign to damage your reputation. Attorneys may argue that you are a greedy person looking to capitalize on your personal injury from multiple sources.

Impact on Medicaid

If you are enrolled in a means-tested public assistance program, such as Medicaid, it is likely to cover the initial costs of your medical treatment after an accident. However, depending on the total amount of crowdfunding donations you receive, you could lose access to Medicaid.

The government has various criteria to determine eligibility for Medicaid. One of these is financial eligibility, which is based on a person’s Modified Adjusted Gross Income (MAGI). If the additional funds raised by crowdfunding mean that your income exceeds the threshold, you may no longer qualify for Medicaid.

Effect on Social Security Insurance (SSI) payments

The double blow of mounting medical bills and injuries that prevent you from working may mean you need assistance from Supplemental Security Income (SSI) to make ends meet. However, SSI is usually for people who earn a maximum of $1,971 from work and other sources of income each month.

If you set up a crowdfunding campaign for yourself, Social Security may consider the donations you receive to be part of your income. This may mean that you receive reduced SSI payments or lose access to SSI benefits. 

If someone else campaigns and uses funds to cover expenses such as housing costs, utilities, and groceries, Social Security may consider this “in-kind support and maintenance” and reduce your SSI check for the months you receive those funds.

Alternatives to GoFundMe campaigns, such as Help Hope Live, may provide a partial solution. Help Hope Live collects donations and pays for your medical bills directly. This may not affect SSI or other benefits, but it is important to check the latest regulations before proceeding.

Tax implications

The IRS normally considers funds received through crowdfunding as personal gifts, which are not taxed as income. However, this may not always be the case, and you may be required to report what you receive. The IRS can request further information if these funds are not included on your tax return.

You must also be careful if your employer donates to your crowdfunding campaign. His or her contributions would generally be included in your gross income as an employee.

Additionally, the IRS requires anyone who receives funds from a crowdfunding campaign to keep careful records about the campaign and how the funds are disposed of for a minimum of 3 years. 

Potential claims from healthcare providers

If you have outstanding medical bills, you could be pursued by doctors and health insurance companies who become aware of your crowdfunding campaign. These parties could file legal claims to recoup their unpaid bills.

Transparency issues

Unfortunately, the reputation of crowdfunding platforms has been damaged by a small number of people who have used them fraudulently. For example, some people have faked illnesses or injuries to obtain donations. Scams like these could make people wary of giving donations to personal injury campaigns.

After receiving funds, it may also be difficult to prove that the money was used for the right purpose. After all, none of us want to share confidential medical information and bills online. However, this lack of transparency could also damage a person’s ability to attract the donations he or she needs.

Get the Advice You Need from Hoffspiegel Law

An accident can leave you reeling from your injuries and the injustice of your situation. We understand that it could be easy to turn to crowdfunding as a quick fix for your immediate problems. However, before you start your campaign, talk to a personal injury attorney at Hoffspiegel Law.

During your case evaluation, we will listen with care and compassion. We understand the pressure you are under, and we have the legal expertise to explain your options, including how to cope with the financial burdens you are facing. We may be able to help you explore alternative options to crowdfunding.

We pride ourselves on giving our clients personal attention at every stage of their personal injury claim. Take the first step toward justice by scheduling a free case evaluation by phone at (404) 760-8600 or by filling out our online contact form.