Financing Options Available for Legal Fees
Enlisting the services of a lawyer often requires a significant financial commitment. From attorney fees to other related legal costs and expenses that may arise, paying for a lawyer is an expensive undertaking. Therefore, lawyers and their clients should both be aware of the various financing options available to help clients meet their monetary obligations.
In the face of a legal matter, lawyers are an invaluable resource. In some cases, it can be virtually impossible to navigate a situation without one. They can open up avenues of recourse that people would otherwise not even know to seek out.
Additionally, not all lawyers are created equal. This is not just from an experience or ability standpoint, but in terms of specialization as well. For instance, an attorney who has handled many similar matters in the past will be able to use that prior experience to inform the matter at hand.
It’s also important to understand the various fees that can be incurred during the course of a legal matter and how a client may be expected to pay for them.
Not all lawyers bill in the same way, although most stick to one of the methods discussed in this article as a general rule. Before engaging the services of an attorney, it is a best practice to ask for an estimate of how much a matter is expected to cost. This is another area where choosing the right lawyer can better prepare you for the realities of your legal action.
How do Lawyers Bill their Clients?
1. Hourly Rate
Most lawyers, professionals, and consultants operate using the hourly rate model. This method is favored for its simplicity.
For every billable hour spent dedicated to a client’s legal matter, the attorney will bill the amount of time expended to do the work. You should be aware that, for an hour of work to be billable, it must require legal work, such as discussing the legal aspects of your matter with you, conducting legal document drafting, court appearances, etc.
Administrative tasks like compiling a client’s bill do not fall under this umbrella and are therefore not billable. Your lawyer should only charge for professional legal services, and not for simple administrative work.
The amount of time billed for each legal task must also be reasonable. The number of billable hours a legal matter can vary slightly from firm to firm, but the hourly rates themselves can vary significantly.
The lawyer’s experience, background, and specialization can all affect the amount of the hourly rate. However, generally, a more experienced and expensive lawyer might work more quickly. Therefore, the total amount you end up being charged could be less, even though the lawyer’s hourly rate is higher.
There are apps that can help you determine whether or not a lawyer’s fees are reasonable, and help you manage your legal expenses.
2. Flat Rate
Sometimes lawyers will have such a familiarity with a particular matter and what it will entail that they can offer their clients a flat rate fee from the beginning. This is commonplace in matters such as will preparation, uncontested divorce, and residential real estate transactions.
3. Retainer Fee
A retainer, as the name suggests, is an amount of money used to retain a lawyer’s services in a matter. It is typically used to pay for the early portions of a legal action. It can be considered a down payment that will likely need to be supplemented as the issue progresses.
4. Contingency Fees
Contingency fees are only practical for certain types of legal action. With contingency fees, the attorney only receives payment contingent on a favorable outcome for their client. As such lawyers who employ this method will be far more discerning on which clients they choose to take on. Obviously, they don’t want to do considerable amounts of work on a case they aren’t sure they can win, only to receive no payment for them in the event of an unfavorable result. This method is most often used in cases of debt collection, personal injury, or malpractice, among others. Should the judgment go their clients way, the attorney will take a percentage of settlement or award, most often ranging from 25 to 40%.
5. Other Fees and Costs
Attorney fees are only part of the financial picture of a legal action. Additional fees are almost always required for document filing, paralegal fees, and court fees. In some cases, you may be expected to cover travel expenses or fees for enlisting the services of expert witnesses or investigators.
What Are Your Options When Paying For Attorney Fees?
It should come as no surprise that not everyone has the disposable income to pay for legal services outright or out of pocket. These financial realities are understood and prepared for by the legal field. There are various options available to try to broaden access to legal services.
1. Personal Loan
As with most other financing ventures, the most common method of compiling funding is by taking out a personal loan from a bank or other financial institution. While often not ideal, it does allow a client to pay all at once while repaying the loan incrementally, in a more manageable fashion.
2. Credit Card
A credit card can work in a similar capacity, at least initially. It can get the ball rolling while the client searches for more sustainable funding avenues. However, sustained use of credit cards has the potential to get the client into an exponentially worse financial situation as interest rates can wreak havoc if not kept in check.
3. Legal Payment Plans
Some firms will allow clients to set up payment plans. These plans allow clients to pay at a more manageable rate without the need of a personal loan, which itself can come with steep interest rates.
This is a situation where it is incumbent on the client to ask if something can be worked out, so don’t be afraid to ask if something can be worked out.
4. Crowdfunding
The growing popularity of crowdfunding services is slowly making its way into the legal sector. Whether a client uses a general platform like Gofundme, or Kickstarter, or a specialized legal crowdfunding platform, the principle is still similar. This allows a client to solicit funds from a wide pool of potential backers they would likely not interact with otherwise. It is especially effective in public matters that can galvanize popular consciousness like corporate corruption or environmental preservation.
Things You Need to Know Before Financing Your Legal Fees
It’s important to know that lawyers can help prospective clients procure financing and open them up to options they may have not considered previously. This can take the form of lending company recommendations from the lawyer. If this is the case, the lawyer must disclose whether or not they have a stake in that particular financial institution. Even if they don’t volunteer this information, it is still a good idea to ask because they are obligated to tell you the truth or face repercussions.
Lawyers must also stay within the confines of reasonableness in terms of both billing and any financing advice or help they may provide. Their advice or recommendations should be in the best interest of the client, not their own.
Conclusion
According to a recent study roughly 75% of low to middle-income individuals have legal matters that they are forced to languish with because they can’t afford proper representation to resolve them. This massive blind spot in access to justice is a very real problem, but one that need not persist.
Unfortunately, clients are often unaware of the financing options open to them. As some clients don’t know where to start to look for a solution to this problem, the onus is often on the attorneys to reach out and illuminate potential clients to the various funding methods available. It only serves to help all parties involved.
