What is a Contingency Fee?

Posted on January 17, 2015

What is a Contingency Fee?

When people visit a personal injury attorney for the first time, they’re often worried about the costs. What if you don’t have the money to pay legal fees? If you don’t have enough money, do you have any other options?

Contingency fees are designed to address these concerns. A contingency fee is an agreement between you and your lawyer in which the lawyer agrees to only get paid if you win your case. Let’s take a closer look at how this works.

How Contingency Fees Work

Let’s say you suffered serious injuries after being attacked by someone else. You want to sue the person who attacked you for your medical expenses, your loss of income and for other damages you’ve incurred. Unfortunately, you don’t have any money to hire a lawyer. You have, however, heard that some personal injury attorneys will work on a contingency basis.

So, you go visit a local attorney. The attorney tells you that she will work on a contingency basis and that you won’t have to worry about legal fees unless you win. This is how contingency fees work. If a lawyer agrees to work for you on a contingent basis, that lawyer is saying that you will not have to pay any legal fees until you win your case. If and when you win, the lawyer will take a percentage of your winnings as your fee.

Agreement and Percentage Fees

When a lawyer and client enter into a contingency fee arrangement, they typically do so with a document called a fee agreement. The agreement is a kind of contract that sets out the terms of the contingency fee relationship. The agreement will state, for example, that the attorney is entitled to receive a certain percentage of any winnings you receive out of the case. Though the specific percentage the agreement states will differ from state to state and from attorney to attorney, it’s typically about thirty percent.

So, for example, let’s say you hire an attorney on a contingency basis. The attorney files a lawsuit, you go through the discovery process, and eventually the two sides agree to settle for $100,000. If the contingency fee agreement stated that the attorney is entitled to thirty percent of any settlement or judgment, you would pay your attorney $30,000, and keep the remaining $70,000 for yourself.

Contingency Fees and Costs

It’s important to realize that there might be some additional costs involved with your lawsuit, even if you agree to a contingency fee arrangement. Many attorneys require, for example, that the client pay for necessary expenses, such as the cost of filing the lawsuit, travel expenses, and other costs that might arise.

Whenever you talk to a lawyer, it’s important that you discuss the fee arrangement in as much detail as possible. You need to be clear about the terms of the agreement, how much your attorney is entitled to receive should you win, and what, if any, fees or costs you’ll be responsible for paying.

When in an accident, it is always best to speak to a reputable personal injury attorney in your area to determine if you have a case and how much that case could be potentially worth.

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