What is a Contingency Fee Agreement?

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When speaking with a personal injury attorney in El Paso you might hear them mention a contingency fee agreement. If you’re curious as to what a contingency fee agreement is, it’s when a lawyer agrees to work on your case for free up front in exchange for a fixed percentage of any money recovered on your behalf at the conclusion of your case. Very few people anticipate requiring a lawyer so they do not have money set aside to pay legal fees when the need arises. Whether or not you should use a contingency fee depends on your ability to handle the financial burden of pay-as-you-go legal services. Insurance claims and lawsuits can sometimes take years to resolve; very few people have the financial flexibility to cover attorney’s fees for such an extended period of time.

Contingency fees are a great way for those who have been injured by the negligence of a third-party to obtain excellent legal representation without having to pay attorney’s fees. Contingency fees are typically used in personal injury, mass tort, wrongful death, and products liability cases. Lawyers are not allowed to use contingency fees for divorces or custody cases, but they can use them for the collection of back child support.

Contingency fees are very different from hourly fees. A lawyer who charges an hourly fee usually requires a retainer – or a set amount of money – up front to cover the initial fees and expenses. After the retainer is exhausted, the client is then sent a bill every month detailing the amount of time the lawyer and his staff spent on the case and any expenses. The client is then expected to pay that bill within 30 days. When a contingency fee is used, the client pays absolutely nothing until the lawyer makes a financial recovery in the client’s case. Once a recovery is made, the lawyer’s fee is a flat percentage off the top. Case expenses are deducted and the rest of the recovery is given to the client.

Contingency fee rates are fairly standard from firm to firm. If your case is in “pre-litigation” (does not require a lawsuit), the general contingency fee is 33% of the total recovery. Once a lawsuit has been filed, the fee increases to 40%. In the rare event an appeal is required, the fee becomes 45%. Initially, these percentages may seem high. However, it is important to keep in mind that insurance claims and lawsuits can often take a year or longer to resolve. If the client is paying an hourly rate for that period of time, the total attorney’s fees would often be much higher than 33-45% of the total recovery.