Many divorce lawyers and family attorneys offer flat fee pricing for their services. Most divorce lawyers in Chicago stick to the billable hour method to calculate their fees. In this article, I will discuss the pros and the cons of using a flat fee billing method versus a billable hour method from both the attorney and the consumer’s perspective.
The Billable Hour in Divorce Cases
Throughout history divorce attorneys have been relying on the billable hour method. This means, the attorney takes an initial retainer fee which the attorney puts into a trust account.
Throughout the month, the attorney and the staff carefully bill for their time and expenses. At the end of the month an invoice gets issued with all the details about what happened with your case and the exact time that was spent on it. The attorney then withdraws money from your retainer to pay off the invoice.
After the retainer is spent, some attorneys ask for a new retainer to ensure they’ll be paid.
Most divorce lawyers in Chicago simply send the client a bill and expect it to be paid immediately. If the invoice is not paid immediately, the divorce lawyer stops working on the case and files a motion to withdraw.
Any unpaid balance of an invoice is then collectable through a court order entered in the divorce court itself. That court order can then be taken to the collections court where property can be seized and wages can be garnished.
95% of attorneys use this method whether they practice family law or not.
Flat Fee Billing In Divorce Cases
There are very few flat fee divorce attorneys so it’s tough to draw generalizations about how flat fee billing works.
Typically, a flat fee divorce involves outlining a series of results and putting a price on each. An agreed divorce with no discovery is $ 3000. An agreed divorce with discovery is $ 5000. A divorce with a trial is $ 10,000.
The theory is that the client and the lawyer are buying certainty of result no matter what the effort. When the effort changes necessarily, a new certain payment is owed until the case reaches its crescendo, a divorce trial.
Flat Fee Billing vs. Hourly Billing in a Divorce Case
This is America and consumers should have options. When you go to the grocery store, there are literally two different kinds of dinosaur shaped chicken nuggets to choose from! So, why shouldn’t legal consumers be able to pick between two different kinds of payment options for their divorce.
Flat Fee billing is attractive. You wouldn’t buy a car based on how much you drove it. You pay for the final result…the car.
Hourly billing is attractive because you’re only paying for the work that’s being done. The profit margin is built into the hour billed.
Clients, I presume, like flat fee billing because it’s a predetermined price. That’s what we’re used to in life. Even ongoing bills are usually on a subscription basis and not based on how much you actually use the service.
Divorce can be a nightmare without the specter of unknown attorneys’ fees. So, at least flat fee billing makes at least something about the divorce known.
So, why do some attorneys offer flat fee billing for a divorce while most stick to the hourly billing system?
I’m convinced divorce attorneys offer flat fee billing as a competitive marketing advantage. They want to be seen as being upfront and guarantee no surprises.
Hourly billing is attractive to divorce attorneys because they know they will get paid for the actual work they do and they will not be caught “holding the bag” if the work expands unexpectedly (even though most flat fee billing arrangements have increased prices for increased work).
Cons of Flat Fee Billing
The problem with flat fee billing is the incentives. The client pays a set amount and wants as much work as possible done for that amount. The attorney wants to do as little work as possible for that prepaid amount. The money is already made, why do more?
Both the client and the lawyer are loath to go to divorce court as this puts them in a secondary billing tier that demands an additional lump sum payment.
This means the flat fee billing attorney and their client have less leverage because they cannot simply walk away from a proposed agreement and say, “We will let the judge decide.”
A divorce lawyer who bills hourly can simply say to his client, “Call their bluff, taking this to hearing will only cost a few hundred dollars.”
A flat fee divorce attorney presumably has to say, “I need an extra $ 5000 because this case is now contested.”
Once the divorce case is contested, incentives get even worse for the flat fee divorce attorney and his client. The client will want a full-on war for their money while the divorce lawyer will want to come to resolution.
I presume that an attorney that offers flat fee divorces will act ethically, in their clients best interests no matter what his or her personal interests are but incentives are incentives…and everyone responds to them consciously or subconsciously.
Why Isn’t Flat Fee Billing More Common with Illinois Divorce Attorneys?
I really don’t know. Flat fee billing makes a lot of sense if it’s a truly agreed and amicable divorce. While I don’t offer flat fee billing, I do tell people that I have settled virtually every truly agreed divorce for less than my retainer of $ 3000.
There is no better advertisement for a divorce lawyer than sending back the unused portion of a retainer…which I have done many times. Those clients always send me referrals.
I really don’t know how flat fee billing attorneys deal with the many strange things that happen in a divorce case? How do you charge for dealing with a parenting coordinator? For evaluating the sale of a property? For emergency motions?
The strangest thing about flat fee billing in divorces is that no attorney ever seems to offer them for long. I would recommend that you ask any attorney offering flat fee billing, “how long have you been doing this?” I would be shocked if anyone (in Chicago, at least) has been doing flat fees for more than 5 years.
Possible ethical considerations regarding Flat Fee Billing in Illinois.
The Illinois Rules of Professional Conduct govern lawyers’ behavior in Illinois. There is a section on attorneys’ fees that reads as follows:
“RULE 1.5: FEES
(a) A lawyer shall not make an agreement for, charge, or collect an unreasonable fee or an unreasonable amount for expenses. The factors to be considered in determining the reasonableness of a fee include the following:
(1) the time and labor required, the novelty and difficulty of the questions involved, and the skill requisite to perform the legal service properly;
(2) the likelihood, if apparent to the client, that the acceptance of the particular employment will preclude other employment by the lawyer;
(3) the fee customarily charged in the locality for similar legal services;
(4) the amount involved and the results obtained;
(5) the time limitations imposed by the client or by the circumstances;
(6) the nature and length of the professional relationship with the client;
(7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and
(8) whether the fee is fixed or contingent.”
It is completely foreseeable that a client could contest any flat fee arrangement where the attorney made good money without excessive work based on this rule.
The rarity of flat fees prevents the flat fee attorney from employing clause 3 “the fee customarily charged in the locality for similar services” as a defense because, customarily, almost no one uses flat fees.
So, any flat fee that worked out well for the attorney, in regards to work vs. results, might be a violation of this rule.
How To Deal With The Downsides of Hourly Billing
No one likes to get a divorce attorney’s bill in the mail. Even a small bill feels bad.
If you can’t pay it all at once, talk about a payment plan. Divorce lawyers are in the “people in crisis” business. We get it. You put trust in us, we’ll put trust in you (to a certain extent, of course).
The fear is that the attorney may be padding their bills because the hourly billing attorney is incentivized to at least round up because he or she makes more money doing that.
If you believe, even for a second, that your divorce attorney is not being honest in their billing, you should fire your divorce attorney immediately.
Your divorce attorney should have your best interests at heart without question. Your best interests should include how he or she bills you. Honesty is the best policy for all parties concerned.
How Does The Law Office of Russell D. Knight Charge?
We bill by the hour. We bill honestly. We listen when you tell us about your financial hardships.
To talk to a Chicago divorce lawyer who cares about how his clients gets billed please give me a call or send me an email.