Right on the Money: What should you be paying your collection attorney?

vector-vintage-money-graphic-c48924First things first – you don’t pay your collection attorney.

The person that owes you does— your customer/debtor.

Unless you are owed an extremely high dollar amount, you will want to be in a commission fee arrangement with your law firm. In other words, your law firm only makes money when it collects on your debt.

For most new attorney-client arrangements a 25 percent contingency fee is standard. So, if the law firm is able to collect $100 on   your behalf, it will keep $25 as its fee and remit $75 to you.

This arrangement could change if you operate a business where your clientele is exclusively other businesses (as opposed to individuals). Then, there is a more sophisticated system that is industry standard, known as the Commercial Law League of America rates. Under these rates the law firm usually receives a lower percentage.

Also, if you have continued to increase the amount of cases you send to the law firm, or if you feel that your contribution to the relationship enables the law firm to aid its bottom line in some way, you are certainly within your right to negotiate your fee arrangement at any time.

Typically, the only time a law firm would request funds from a client would be shortly after initial placement of a new claim. This means that the firm would evaluate the claim, send a required letter to the customer/debtor and advise you of the amount required to litigate the claim, as well as other possible accompanying fees.

These fees are for court costs, not the law firm. It should be clear between you and your law firm that these funds will be returned to you upon the first receipts from your customer/debtor.

Well, there it is, short and sweet. This should help you to understand the basic costs involved in debt collection and assist you in determining the collection route you’re going to take.