When someone else’s negligence is the direct cause of a physical injury, it’s natural to want them to pay for any related medical expenses, time off from work, and even the emotional scars it may have left. If you’ve never been through this before, figuring out what to do can be overwhelming and a bit scary — especially if you’re not sure your injury-related expenses are worth the lawyer’s fees.
As someone navigating this territory for the first time, I’m learning about the differences between lawyer’s fees and expenses, settlement stages, and the like. It’s not fun, and it can get very confusing. While I’m not offering expert legal advice, I’d like to shed some light on the process from a financial perspective.
The Difference Between Lawyer Fees and Expenses
It’s first important to understand the different types of costs — and who ends up paying them. Lawyer fees refer to what lawyers charge for their time, generally between 33% and 40% of the settlement you receive (if you’re awarded one). In most personal injury suits, you aren’t required to pay for a lawyer’s time if they don’t win the case for you.
Personal injury case expenses include things like medical record and police report print-outs, postage, investigators and expert witnesses, and any court costs if you file a formal lawsuit. These are often paid upfront by your lawyer, then deducted from your share of the settlement (again, if you receive one). Keep in mind that some lawyers require their clients to pay these expenses regardless of whether their case wins in court.
Two Different Payment Systems: Hourly/Retainer and Contingency
Most personal injury lawyers charge on a contingency basis. This simply means they postpone charging you for their time because they expect to win the case and collect the fee from your settlement. This makes it easier for those of us who can’t afford to pay for these fees out-of-pocket.
The other method is an hourly rate. Lawyers who charge by the hour may require you to pay the first installment — a retainer — right away. However, the hourly structure isn’t as common in a personal injury case unless it’s extremely risky for the lawyer (i.e., there’s a strong chance they won’t win).
The Earlier in the Process You Settle, the Less Costly
Many personal injury incidents are settled without having to go to court. Your lawyer will send a letter to the responsible party, along with proof of your injuries and expenses, and demand payment. If they agree, you’ll still pay a lawyer’s fee out of this amount, but the good news is that many states cap the lawyer’s fee for out-of-court settlements in the 33% range. Your lawyer will also deduct any operating expenses from your cut. So, while you’ll still end up paying lawyer fees and expenses, a larger amount of your settlement will go back in your pocket.
Let’s say the guilty person never responds to the demand letter and you choose to take the case to court. For settlements that happen during or after court, lawyers can charge a higher fee, and the expenses related to your case will be much more extensive. The judge may require the guilty person to pay your legal fees, but this isn’t guaranteed.
It makes sense to settle outside of court if your injuries are minor and the other party is fully cooperative. But, if you’re up against a stubborn person or insurance company that refuses to pay, a lawyer may be your best option.
Deciding If You Should Hire a Lawyer
Many factors play into deciding if you need to hire a lawyer. If the amount you’re pursuing will be absorbed by lawyer fees and expenses, it may be better to deal with the insurance companies directly or represent yourself in small claims court.
On the other hand, statistics show that legal representation usually increases the chances (and the amount) of a settlement. The fact that lawyers can help you get more of your money back can help absorb the cost of hiring them.
Ultimately, whether you hire a lawyer or not is up to you. Check the numbers and, better yet, talk to a trusted attorney or legal advisor to help you decide the right course of action. Depending on your situation, you may be just as well off, financially, pursuing it yourself or letting it go.
Have you ever dealt with a personal injury case? Did you hire a lawyer, and did it make sense, financially?
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