Hiring an attorney for any legal matter can be daunting—particularly when expenses come into play. If it’s a legal matter that appears to come out of nowhere, it can stretch your wallet extra thin as opposed to a matter that was foreseen and properly budgeted for. With that in mind, here are some tips on how to plan financially for hiring an attorney.
Understanding attorney payment systems
Attorneys can be paid by a pre-determined flat fee, on an hourly basis, or by contingency fees.
Most lawyers tend to work on an hourly basis. While this is the industry standard, critics claim that an hourly billing system tends to draw out the process and lead to increased expenses. Hourly rates will vary depending on the lawyer’s experience and expertise, as well as the area in which they practice and the rates other lawyers charge. On the low end, an attorney may charge as little as $50 an hour. Conversely, a highly specialized attorney may charge as much as $1000 hourly. Hourly fees are standard across most practice areas where the defendant does not stand to receive a settlement or payment for damages in the event of winning a trial or litigation proceedings.
A flat fee is often appealing to clients because the attorney is paid up front and the price will not rise should the case drag on. Flat-fee arrangements can also come at a lower cost compared to hourly billing systems. Typically, the fee is determined once the attorney evaluates the case and figures out how much they should charge. Flat-fee billing is associated with low-risk cases where the attorney has a clear idea of the timeline.
Contingency fees work best for individuals who may otherwise be unable to bring their case to court due to financial restrictions because the attorney is not paid unless the client wins the case. These fees are only used in cases in which the client stands to receive money upon winning, like in personal injury or workers’ compensation cases. Many states restrict the use of contingency fees for other types of cases, like criminal cases. The client is responsible for paying filing fees and other costs to have their case heard, and all risks and rewards are shared by the attorney and client dually. Clients won’t pay contingency fees until they win money in damages, and often the attorney only offers this option if the client has a high chance of winning. The amount a lawyer can deduct from his or her client’s settlement depends on the jurisdiction where the case was tried, though the fees average between 30 and 40 percent of the total settlement.
Why might a lawyer accept a contingency fee if they risk earning nothing?
This may seem like a gamble on the attorney’s part, but the risk comes with a reward, and attorneys stand to make a good amount if the damages received are substantial enough.
“There is a chance that under a contingency arrangement, the lawyer won’t get paid at all,” the American Bar Association writes on their website. “However, this is also a chance that, if you end up with a large amount being recovered, the lawyer may end up earning more than under a traditional fee arrangement.”
To get the most out of the damages awarded to you, negotiate with your attorney to pay out the fees owed to the court before she takes her percentage. While attorneys typically want to be paid before these fees are deducted, this is an area in which you can negotiate before you’ve hired her, according to the ABA.
That contingency fees better encourage attorneys to win cases is confirmed by those working in the field.
“From a client’s perspective, we’re kind of in it together on a contingency-fee basis, that I have an incentive to—number one—take a good case that I think I’m going to win, so I can ensure recovery for my office and for the client,” says Christopher L. Sallay, a personal injury attorney and partner at Queller, Fisher, Washor, Fuchs & Kool, who does all his cases on a contingency-fee basis. “If it was an hourly rate the client wanted to pay me, the incentive to win the case would still be there, because you are going to get money, but the attorney’s getting paid no matter what. It’s not quite the same incentive.”
Are you responsible for legal fees if you win?
Beyond the fee you have worked out to pay your attorney—be it hourly, flat rate, or contingency—court fees must also be paid after the trial, which include filing fees and records searches. You may also be responsible for the cost of expert witnesses.
The amount of these fees can vary widely depending on the nature of the case you are involved in and they may add up quickly. “For a standard auto case that doesn’t go to trial, you could be talking somewhere around $10,000 to $15,000,” Sallay says. “In a case that does go to trial, it could be over $20,000, because you have to pay experts to come to court to testify.”
Unlike in Canada and the United Kingdom, the U.S. does not have a “loser pays” system in place, in which the losing party would pay the winning party’s costs for appearing in court, which includes both court and attorney fees. Winning parties in the U.S. must pay their own costs. In certain cases in the U.S., you can request a fee waiver or submit an application to appear in court without paying fees.
For this reason, appearing in court even if your attorney is working on a contingency fee could still end up costing you money.
“Just for New York, in a non-medical malpractice case, the standard fee is one third,” Sallay says of attorney fees on a contingency basis. “What happens is the case is resolved, the one-third in retainer in a non-medical malpractice case is the legal fee, so it comes off the top so to speak. So if it’s $100, 33 and a third is deducted, then from the client’s share the expenses are deducted on the case: court costs, depositions, experts, things of that nature.”
Depending on the type of case, you might be able to deduct legal fees from your taxes. Personal legal fees—cases like divorce, or in libel suits—are non-deductible, but cases involving your business can be more forgiving.
Set a budget from the start and stick with it
Your lawyer is the last person you should feel afraid of, so be sure to tell them from the get-go if you have any budgetary limits. You should set a realistic goal of what you can afford in your case, and once you’ve set that, stick to it. Also, make sure you protect yourself from practices who try to set low budgets as a marketing ploy that will then become inflated with fees and other misleading fine-print points.
You should be involved in the entire process of finding a lawyer, which will hopefully keep you from getting scammed by cleverly worded marketing. Your budget should hold clear goals, outline all costs involved in achieving those goals, and should also be revisited as the case develops further so any necessary adjustments can be made.
Always have emergency money set aside for the “just in case” moments
Really this comes down to setting aside a healthy amount of emergency-fund money—the type of rainy-day fund that you hope to never have to use but are thankful for if and when you actually have to.
Hiring an attorney doesn’t have to break the bank. Figuring out the payment system that works best for you, familiarizing yourself with the process, and sticking to a budget will help you get the right counsel at the right price. If you find you’re still struggling to afford legal representation after following these steps, consider low-cost resources through the legal aid society or similar organizations in your area.