Collecting fees in difficult economic times

website-design-guide-cover-2

Free: 10 Things the Best Law-Firm Website Designs Have in Common

For seven years, Lawyerist has published an annual list of the best law firm websites. Now, you can find out what they have in common.

With the stock market gyrating and the economy sinking, many lawyers are already starting to see clients fall behind on paying their bills.  Here are a few ideas for managing fee collection through troubling times:

Comfort clients

First of all, and to put the strategies below in context, make contact with your clients, particularly the ones who have typically paid their fees. Everyone’s nervous about the economy; you are one of their trusted professionals. Call them. See how they’re doing. Find out if there is anything you can do for them. Give them your ear. Don’t bill them for the call.

Send statements

Now is not the time to let invoices sit around unsent.  Yes, your clients maybe hurting financially, but they need to know what the status of their bill with you is. A big surprise later certainly won’t help.  If the clients have many bills, you need to make sure you’re figured into the mix. If clients don’t see a bill from you, they may think they don’t owe you anything or that your bill can wait a couple of months.

Review receivables

Take a look at your clients who are more than 90 days behind on their payments. With a down economy, some of the clients who have not been paying never will. Take a look at those clients’ cases and determine whether there are any you would be better off withdrawing from.

You need to find the files that have no pending discovery or trial deadlines, venued in state court rather than federal court (because you may not be allowed to withdraw from federal court because of unpaid fees), and may require a lot of uncompensated work if you don’t make some tough decisions. Make sure you’ve asked for payment first.

For clients who are less than 90 days behind, call or write them.  Don’t ignore their overdue bills and don’t threaten them either. Just remind them that you’ve done good work for them and that you need to be paid. If you ask for a partial payment or a payment plan, they may appreciate your flexibility and you might get some money that would otherwise have gone to their other creditors.

Require retainers

If you sometimes begin a representation without an advance retainer, start requiring one, and if you currently get retainers, set the initial retainer higher. By making better use of advance retainers, you are reducing your risk of nonpayment in the future, which may help balance out the slow payments by some of your current clients.

Line up liens

In many states, a lawyer can assert an attorney’s lien against a client’s property that was the subject of the lawyer’s representation, which can be an effective way to ensure collection of a lawyer’s fee. But a lawyer can lose his or her right to the lien by not following the technical requirements regarding notice and filing.

In Minnesota, for example, an notice of intent to claim an attorney’s lien on a client’s real property must be filed within 120 days of the last work the lawyer performed on behalf of the client. If the notice is not filed on time, the right to claim a lien is lost.

Avoid Animosity

When dealing with clients who aren’t paying, remember that a fee dispute with a client that escalates may leave you with a conflict of interest. Lawyers cannot sue a current client over fees. Stress over a client’s nonpayment has led more than one lawyer to do or say things that violate the Rules of Professional Conduct.

If you believe that an existing client owns property that could be used as security for your fee, treat any request for a security agreement as a business transaction and follow the ethical rules (ABA model rule 1.8(a)), especially giving the client an opportunity to consult independent counsel about the transaction.  The same goes for converting an hourly fee agreement into a contingent fee arrangement or asking a client to sign a confession of judgement.

Subscribe

Get Lawyerist in Your Inbox, Daily

Current Articles
Current Lab Discussions
  • This is a good, timely and helpful article. I am printing it out and I am going to try to read it weekly.

    Thanks

    Steve Bolton

  • Zale Dowlen

    I’m liking up front flat fees more and more.

  • Yes, that works well for many lawyers, particularly for transactional work or high volume practices such as bankruptcy. Some folks equate an up-front flat fee with a non-refundable fee. There are bar authorities that seem to be cracking down on non-refundable fees and fees that are not placed in a trust account, such as Illinois; it is also a pet-peeve of the disciplinary agency in MN.

    For staying ahead of the client on fees, it probably doesn’t matter if one calls it a flat fee or an initial retainer as long as the money comes in before the work starts.

  • I feel that the most willing time for a client is to pay you money is at the very first meeting. Thats why we advocate getting a fee retainer up front and bill weekly (if there is more then $100.00 in fees occurred). Our software shows at all times what is availible in trust so when it depletes to $500.00 it’s time to ask for more money. We found that clients like the frequent billings as it tells them the story of exactly what is going on in a file and makes them more realistic in their demands. after all justice has a price.

  • Very interesting. I’m surprised that there are lawyers who have enough time to bill weekly and clients who want to receive such frequent bills, especially since most people only get paid twice a month. I’d also be concerned that clients would feel that the vast bulk of the paperwork they receive from their lawyers is invoices. But if it results in fewer clients that are behind on their bills, then it sounds like it works.