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Understanding Contingency Fees

When hiring a lawyer, it is always important to understand what their services will cost. A traditional attorney’s fee is billed at an hourly rate and paid monthly by the client. That’s fine if you are a corporation or a successful business owner, but many people cannot afford to pay a monthly bill. Nevertheless, they may need legal services. For these people, a contingency fee can be a good option.

A contingency fee is based upon the amount of money the lawyer recovers for you. If they recover nothing, you pay no attorneys fees. A typical contingency fee is one third of the total recovery, plus costs. The fee is payable at the time the case is concluded. The contingency fee allows you to protect your legal rights even if you cannot pay for representation up front.

It is important to understand the basic bargain that makes up a contingency fee. The lawyer is taking a risk that they may lose the case and receive nothing for their work. The client is taking a risk that the lawyer may recover a substantial amount without spending a great deal of time. Some cases are resolved easily with a substantial fee. Other cases may involve a great deal of work with no compensation. It is important for everyone to understand the agreement at the outset.

Here are some common questions about contingency fees:

Are there things that are not covered by the contingency fee?

Your attorney should provide you with a written fee agreement. That agreement should answer this question. In a typical agreement, the attorney’s fees will not exceed the percentage shown in the agreement. You will, however, need to repay any litigation costs.

What are “Costs”?

Costs are out-of-pocket expenses that the attorney pays to get the case to trial. Although attorneys typically advance these costs rather than asking the client to pay them, they are entitled to repayment at the end of the case. An example is the cost of hiring a court reporter to attend depositions or the cost of ordering medical records. Costs can be a small amount early in the case, but they may become more substantial if the case progresses to trial.

When is a contingency fee a bad idea?

If you have a very strong case and you can afford to pay hourly for legal services, then a contingency fee may not be the best option. If you have a strong breach of contract claim for $60,000, it may cost you $5000 to litigate the case on an hourly basis and recover the money. If you can afford to pay the $5000, this would be a better option than paying a $20,000 contingency fee. When you do this, you are taking the risk of advancing the money, and you are taking the risk that you might pay for legal fees and still lose the case. If the case, is strong, that me be a worthwhile risk to save money on attorney’s fees

Will I get my attorneys fees back in the lawsuit?

Generally No. In the American legal system, the winning party does not normally receive attorney’s fees from the losing party. There are a few exceptions to this rule, but generally, your opponent will not be required to pay your attorney’s fees.

What else comes out of my settlement or verdict?

The answer to this depends on the type of case. The most common type of contingency fee case is a personal injury lawsuit. In injury cases, you will typically be required to pay 1) the contingency fee, 2) the litigation costs and 3) your medical bills. Many people do not realize that they are required to repay medical bills. Even if your medical bills were paid by somebody else (such as an insurance company), you will usually be required to repay the bills. Most health insurance contracts require policy holders to repay medical bills if they win a lawsuit or settlement against another person.

In a typical car collision lawsuit that goes to trial, the ultimate breakdown might look something like this:

Total Jury Verdict $ 45,000

Attorney’s Fees – $ 15,000

Litigation costs -$ 1,500

Repayment of Medical Bills -$ 13,500


Net to Client $15,000

Is it Worth the Cost to Hire a Lawyer?

The answer to this question really depends on your case. If you have a serious injury, it is almost always necessary to get a lawyer. Most clients call a lawyer because the insurance company has offered them nothing or refused to respond at all. In that case, a lawyer may be the only option. If you have a minor dispute and the insurance company has made you a reasonable offer to resolve it – then it may make sense to resolve the case yourself. If you have some question about whether an offer is fair, consult with a lawyer and ask them. A good lawyer will tell you when you don’t need them.

If you have more questions about contingency fees or lawsuits generally – feel free to contact a lawyer like Eric Parker at Stotis & Baird Chartered via the web or on the phone at 312-461-1000.


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