Margaret (Peggy) Simpson, left partly paralyzed after her estranged husband shot her in Hyattsville two years ago, has received a $1 million out-of-court settlement.

Simpson, 33, filed the $315 million suit against her husband, Joseph Simpson, last summer after a Prince George's County Circuit Court judge found him not guilty of attempted murder by reason of insanity.

Joseph Simpson was released from a Maryland psychiatric hospital last August and ordered to remain in the metropolitan area where his activities could be monitored by the court.

"The more I thought about having to come up there [for a civil trial], I got really scared . . . . I don't know what state of mind he's in," Peggy Simpson said yesterday in a telephone interview. She said she is fearful that her husband may attack her again.

In April 1983, according to testimony during the criminal trial, Joseph Simpson, distraught over their marital problems, attacked Peggy Simpson in her parents' front yard in Hyattsville. While their children and other relatives watched, he jumped out of his car and shot her five times in the back. She is now paralyzed from the waist down and confined to a wheelchair.

Judge Audrey Melbourne agreed with one doctor who determined that Joseph Simpson was suffering from a mental disorder and was temporarily insane when he shot his wife. Melbourne's ruling enraged many citizens, most notably the Stephanie Roper Committee (SRC), a group that lobbies for victims' rights.

The Roper Committee helped Simpson file the suit. Yesterday her attorney, Jerome Kuta, said the out-of-court settlement would be easier for all concerned.

"It doesn't matter if it's 1 million or 10 million because there's not much chance of collecting it," he said.

Kuta explained that Joseph Simpson, now working for a service company at Dulles Airport, has limited funds and is already under Alabama court orders to pay alimony and child support of about $400 a month.

Kuta said Joseph Simpson probably will not pay much on the civil damages, but "if he ever really hits big, we can hit it."

The settlement of her civil suit was approved earlier this week by Prince George's Circuit Court Judge Albert T. Blackwell. The couple's divorce should be final in October, Peggy Simpson said.

Joseph Simpson's attorney could not be reached yesterday.

Peggy Simpson said her husband also agreed to turn over to her his interest in their Alabama home. She said that she and the girls are living on her social security and payments from her husband that have just " . . . there's not much chance of collecting it." -- Peggy Simpson's attorney begun to arrive. She also receives some health care benefits from the state, and she said she is now looking for funds to modify her house for her wheelchair.

Recently, Peggy Simpson said, Alabama Gov. George Wallace's aides have been keeping her apprised about surgery the governor had to treat chronic back pain from his gunshot wounds. Simpson, with similar problems, said yesterday, "I'll probably write him myself to find out if the surgery is worth it."

In recent months Simpson has done some volunteer secretarial work for an independent living center in Birmingham. "The biggest problem I have is transportation," she said. If she can afford a car with hand controls, she said, she would like to learn to drive again.