Attorneys typically have three ways to charge fees to their clients: a flat fee, a contingency fee, and an hourly rate. The attorney considers the type of work in deciding which type of fee to charge.
The most simple fee is the flat fee. The attorney charges a set amount, for example $500.00, to do a specific job, for example to write a will. Attorneys usually only use the flat fee for very standardized work. Examples include a basic Chapter 7 bankruptcy, writing a will, writing the documents to create a business entity, and writing a deed or other standard document. The advantage to a flat fee is that the client knows exactly what he will pay. The disadvantage is that it can sometimes translate to a high hourly rate.
The most common fee is an hourly rate. The attorney charges an set amount, for example $250.00, per hour of work. The attorney bills in increments of time, for example one-tenth of an hour. When an attorney charges an hourly rate, the attorney usually requires a deposit from the client from which the attorney will pay himself for his work. For example, the attorney may take a case for $250.00 per hour and require a deposit of $4,000.00. At the end of the first billing cycle, the attorney has done 2.3 hours of work and will then pay himself $575.00 out of the $4,000.00 deposit, leaving $3,425.00 of the client’s money. Examples of cases in which attorneys typically charge an hourly rate include civil litigation, family law cases, document review, negotiations, and bankruptcy litigation. The advantage to the hourly rate is that the client pays an amount that fits the time that the attorney actually spends on the client’s case. The disadvantage to the hourly rate is that in some cases the work can really pile up, due to the client causing more work or due to factors out of the client’s control like a vexatious opposing party, and the fees can be very high. It is also a way for law firms to take advantage of clients and include a minimum time to bill for each type of task. For example, a firm might charge a minimum of .3 hours to review anything, including a one-line email. Therefore, clients should watch out for fee agreements that include this type of provision.
The last type of fee is the contingency fee. The attorney charges a percentage of what the attorney recovers for the client. Contingency fees typically range from 25% to 40%. Examples of cases for which attorneys typically charge a contingency fee include personal injury claims and collections. The advantage of the contingency fee is that the client pays no fees if the claim is unsuccessful. The disadvantage is that the fee will be a significant portion of the client’s successful claim. Also, the contingency fee can work out to an outstanding hourly rate or a terrible hourly rate, which can be both an advantage and a disadvantage.
Therefore, when shopping for an attorney’s services, the client should be aware of the fee and make sure that the fee fits the work.
