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California Debt Blog: Fees for your debt collection case

January 19, 2010 by Jonathan Stein

I have had a rash of questions lately about fees for lawyers. This comes in the context of personal injury cases, consumer law and malpractice cases. So, let me give a very basic explanation of types of fees and typical fees for your debt collection cases.

Contingency fee: This is the most common type of fee in personal injury cases. This is not common in debt collection cases. This means the attorney gets a percentage of the settlement. There is no set percentage. Generally, the fee runs from 30% to 40% of the settlement. I have seen attorneys charge 45% and I have seen attorneys charge 25%. But, this is the general range. So, calculating a fee is quite simple: take your settlement and multiply by the percentage. If your case settles for $10,000, and the attorney fees are 30%, the attorney gets $3,000. There are a few variations of this fee. Sometimes the attorney takes the fee after he subtracts out costs, sometimes before costs. But this is the general concept.

Flat fee: The attorney does the work for one flat fee. So, if the attorney quotes you $1,000 for a flat fee, then this is how much you will pay, regardless of the amount of work the attorney does. If the attorney does an hour of work, he makes a lot of money for that hour. If he takes 100 hours to do the work, he is making close to minimum wage. But you always know how much you are going to pay. This is one way of having a fee for a debt collection case. Typically, this client wants me to negotiate a payment plan with a creditor like Capitol One or with a debt collector.

Hourly: This is what most people are used to. Usually, we do not see this in personal injury cases. It is what it sounds like: take the number of hours worked on a case and multiply by the hourly rate. 5 hours at $200 per hour is $1,000. Usually, a debt collection defense case without a cross complaint against the debt collector is handled this way. So, if the debt collector has not violated any laws and sues you, most attorneys are going to handle it on an hourly basis. Now you know why debt collectors sue people over small amounts like $1,500 or $2,500. If there are no FDCPA or Rosenthal Act violations, it quickly gets expensive to prove that you do not owe the debt!

Hybrid: There are numerous ways of combining these. An attorney can charge a flat rate for some work and hourly for additional work. An attorney can charge hourly to do some things and then a contingency fee. Usually, if there is an FDCPA or Rosenthal Act case, a hybrid fee is best. This could be a small hourly with the rest of the money paid by the collector upon successful completion of the case. Or it could be a flat rate with the rest being paid by the collector upon successful completion of the case.

Pro bono: This is a big one and people ask about it all the time. This means “for free.” In other words, the attorney will not be charging you. If an attorney agrees to work for free, you do not get a bill. However, if you call an attorney and ask them to take your case pro bono, most attorneys will tell you no. We like doing pro bono work and most of us take on pro bono cases. But these are cases that we select for a variety of factors.

This is not comprehensive by any means. This is just an overview of different types of fees. You should always make sure you have a signed fee agreement with an attorney and that you fully understand the fee being charged. And make sure you understand if there is a cap. Hiring an attorney and paying the attorney $5,000 to stop a collector from getting $1,500 that you owe may not make any sense. So read the fee agreement, ask questions and make sure you understand the fee.

Categories: Current Affairs, Legal Process Tags: attorney fees, capitol one, contingency fee, debt collection, Erica Brachfeld, flat fee, hourly fee, hybrid fee, pro bono

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