Understanding Contingency Fees: When Do You Actually Pay a Lawyer?
Working with an accredited lawyer on all your legal needs is an excellent choice as this professional can help guide you through the nuances of the field. However, the pay structure for lawyers works differently depending on who you’re working with. Clarifying what structure your intended lawyer uses is one of the key tips to know about a legal consultation so that you make the right choice when hiring.
One common method used is a contingency fee basis, but knowing what this means is difficult. Learn what this pay structure is and how it works so you can determine if you want to partner with a lawyer using this structure.
What Is a Contingency Fee?
First and foremost, let’s take a look at what a contingency fee is. Simply put, it is a payment structure where legal fees will only be owed if you as the client win your case.
This structure differs from an hourly or flare-rate for legal fees where compensation is owed regardless of the outcome of the case.
Many personal injury lawyers use the contingency fee system as opposed to the alternate system because it aligns their interests with the client’s, thus incentivizing them to perform the best work possible. It also makes legal representation affordable to those who many not be able to afford it otherwise.
When Do You Pay a Lawyer on a Contingency Fee Basis?
As alluded to, contingency fees tend to only be paid out when there is success in your case. However, “success” can be defined in a number of ways in regards to when the fee is paid:
1. If You Win the Case
The most commonly paid point of time for contingent fees is naturally if and when you win the case. The payment just gets suspected from the settlement amount or court-awarded damages, with the lawyer’s pay being a pre-agreed percentage of the total amount. Common contingency fee amounts fluctuate between 30%-40%, though this can vary.
2. If the Case Goes to Trial
The second time a contingency fee may be owed is if your case ends up going through full-scale litigation. This is only because fees may increase given the time commitment and costs associated with trial, though this situation should also be pre-agreed upon with your lawyer. Be aware that additional court costs may be deducted from your award amount if you win.
3. If the Case Settles Out of Court
Finally, settlement is an excellent resolution as it often is a quicker process than litigation and has reduced legal fees. If your case settles early, the contingency fee will be owed and the amount will be deducted. The only downside is that settlement values can sometimes be lower than those from litigation, but the time saved is a major benefit.
What Happens If You Lose the Case?
No case is airtight and it’s entirely possible that you may not actually win; even if you have the help of the best lawyer. In most cases, personal injury attorneys will not require you to pay legal fees.
You may still be responsible for certain out-of-pocket costs like court filing fees, expert witness fees, and more, but nothing directly to your lawyer’s pocket. You should always ask your potential lawyer what fees you need to pay if you lose, though, as this can also vary.
Key Factors That Can Affect Contingency Fees
As mentioned, the percentage of your award amount that will be given to the lawyer as a contingent fee can fluctuate. The determine factors for this amount include:
- Complexity of the case (high-risk cases may have higher fees).
- Negotiation of legal fees before signing a contract.
- Any state laws regulating contingency fees.
Given the fluctuation that can occur with contingency fees, it’s important to ask your lawyer a few questions ahead of time. This will help you narrow down what to expect. The most important 4 questions to ask are as follows:
- What percentage of the settlement will you take?
- Are there any case-related expenses I might have to cover?
- Will the fee increase if the case goes to trial?
- Are there any situations where I would owe money even if I lose?
By remembering all of the above and asking the questions outlined, you will have a solid handle on what you may owe in court.
Understand your financial obligation to your lawyer
Under a contingency fee structure, you will most often only need to pay if you win your case. However, understanding how a contingency fee works under your specific lawyer will allow you to know whether you will owe money even if you lose. Take the time during a free consultation to ask all these important questions so that you are not blind sided.
