If we look at what we know about the U.S. legal system, we remember that most attorneys are paid by the hour. Even the attorneys we know work the same, first receiving a down payment (a retainer) and then billing their client by the hour of work they put in for them. Injury attorneys are a different story, one which we will discuss today.
Injury attorneys work on something call contingency fees. They don’t require a down payment and don’t get paid by the hour. More often than not, injury attorneys end up paying for client’s cases out of their own pocket, hoping that this investment will pay out in the future. They take a calculated bet with each case they take and earn money based on a contingency fee. You might have heard how contingency fees work: injury attorneys don’t get paid unless they win your case, and they usually receive roughly one third of your settlement. If they lose, you don’t own them any kind of money. Although this approach does sound good at first glance, the reality isn’t just as great.
Taking a case in this manner is called working on a “contingency fee basis”. You will receive an agreement from the law firm called a Fee Agreement, which we strongly advise you read carefully and ask clarify any questions you might have, in order to make sure you understand what amount you will end up paying. Most clients think that the law firm will receive one third of the settlement and them receiving the rest of the two thirds. In reality, things are not that simple.
There are a number of fees and costs which affect the final size of the settlement, often meaning that the client will receive less money that initially expected. Attorneys are required by law to explain to their clients how their fees are calculated, but in the end, the client is responsible for understanding the document before they sign it, since its contents are binding from that moment on.
When speaking about the costs covered in this kind of agreement, we first of all have to mention the expenses your attorney pays while working on your case. These usually include depositions, expert witnesses, copying costs and more. Bear in mind, these costs are deducted first, before the calculation of the final amount of the contingency fee. Apart from this, you might have unpaid or partially paid medical liens before you receive your settlement money. Your attorney must pay these before your settlement is paid. In these cases, attorneys use Letters of Protection, which are basically legal promises which state that they will be paid from your settlement funds, or funds you receive from a trial or arbitration.
Talking about the size of the contingency fee, you usually may choose between 33% and 40%. This difference usually takes place if the attorney has to take your claim to court or arbitration, which in turn leads to much more time and resources invested by them in defending you. Costs related to trials or arbitration can often quickly build up, since depositions, transcripts and expert witnesses who must come to testify in court are all expensive.
In order to better understand the entire process, we have set up two examples which might help: If your proposed settlement is $15,000 and the attorney costs are $500, your subtotal will be $14,500. If your law firm is compensated with 33, 3%, they will receive $4,833, bringing your new subtotal to $9,667 before the payment of an outstanding medical bill of $4000. The final net settlement you receive in this case is $5,667 out of the initial %15,000. If the contingency fee were 40%, your final settlement will lower to $4,700.
We hope this explanation sheds some light on how contingency fees affect the size of your settlement. If you want to learn more about this subject or have additional questions, visit www.injuryclaimcoach.com and we’ll reply as soon as possible. Best of luck with your case!