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Understanding Attorney Percentage of Settlement

Understanding Attorney Percentage of Settlement

An attorney’s percentage of settlement is the part of the settlement amount that a client pays their attorney for their legal services in a court case or settlement. People often use this method of payment in a contingency fee structure where the client is obligated to pay the attorney only if they win their settlement or court judgment.

Since attorney fees are a major part of legal costs to be deducted from the settlement amount, the attorney percentage significantly affects the final total amount you take home from your settlement money. That’s why you need to understand how attorney percentage works and how it’s calculated under different fee structures so you can negotiate for a percentage that is fair for both you and your attorney.

If you need financial assistance to pay your medical bills and other legal expenses while waiting for your settlement, you can obtain a cash advance by applying for a pre-settlement loan at Stonewood Funding. We offer the best interest rates with no application fees, and you can get your funding immediately after we approve. The loan is non-recourse; so you pay back only if you win your case. Book a free consultation with us today to assess your case and get your funding as fast as possible.

This comprehensive guide covers all you need to know about the attorney percentage of a settlement, how it’s calculated, and pro tips on how to negotiate for a fair attorney fee in a settlement.

What Is an Attorney’s Percentage of Settlement?

What Is an Attorney's Percentage of Settlement?

An attorney’s percentage of a settlement is the portion of the settlement money that the attorney receives as compensation for their services. It is commonly used in cases where an attorney works on a contingency fee basis, which means that the attorney only receives payment if they successfully secure a settlement for their client. This arrangement helps make sure that the client does not bear any upfront legal costs.

An attorney’s percentage is usually agreed upon by the client and the attorney before the attorney starts working on the case. The exact amount they receive depends on the settlement amount, which is usually determined through negotiations between the attorney and the opposing party or their insurer. If the case is successful, the attorney’s percentage is deducted from the settlement amount before transferring the balance to the client.

Examples of common cases where the attorney’s percentage of settlement applies include personal injury cases, car accident cases, medical malpractice, employment discrimination, workers’ compensation claims, and class action lawsuits.

Typical Price Ranges for Attorney’s Percentage of Settlement for Different Cases

Attorney percentage varies for different types of cases and settlements. Before you hire an attorney for a settlement negotiation, make sure you understand how much you’re likely to pay the attorney out of your settlement money. Here’s an idea of the typical ranges for different types of cases:

  • For a personal injury claim, attorneys typically charge a contingency fee ranging from 33% to 40%. The fees can get up to 40% if the case goes to trial.
  • For workers’ compensation cases, the attorney fee is usually regulated by state laws, but the average range is 10% to 25%.
  • For medical malpractice cases, the attorney percentage is usually between 30% to 40%, similar to personal injury cases.

How Attorney Fees are Structured in the United States

How Attorney Fees are Structured in the United States

If you’re looking to hire a personal injury lawyer for a settlement, you need to understand the different attorney fee structures that are commonly used in your area. In the United States, attorneys mostly charge contingency fees, hourly rates, or hybrid fees. Each of these fee structures has its advantages and drawbacks, and what works best for you depends on the details of your case and your negotiations with your attorney.

1. Contingency Fees

In a contingency fee agreement, personal injury lawyers agree to be paid a predefined percentage of the settlement amount. Contingency fees are more suitable for clients who may not be able to pay hourly fees over an extended period. The most important part of this agreement is that the attorney will receive their payment only when they win the settlement. In the US, contingency fees usually fall between 33% to 40% of the settlement amount.

When discussing contingency fees with an attorney, make sure you clarify whether the agreed percentage applies to the gross or net settlement amount. The gross settlement amount is the total amount awarded to the settlement without any deductions. On the other hand, the net settlement amount is the amount that remains after all deductions, such as court filing fees and other legal costs, have been subtracted from the gross amount.

Example Calculation

Assume you’re awarded a total settlement amount of $100,000, incurred total legal expenses of $10,000, and agreed on a contingency attorney fee of 30%.

  • If the attorney percentage applies to the gross settlement:
    • Attorney’s fees: 30% of gross settlement = 30% x $100,000 = $30,000
    • Client receives: $100,000 – $30,000 = $70,000 (before any other fees are deducted)
  • If the attorney percentage applies to the net settlement:
    • Net settlement amount: Gross settlement – other expenses = $100,000 – $10,000 = $90,000
    • Attorney’s fees: 30% of net settlement = 30% x $90,000 = $27,000
    • Client receives: $90,000 – $27,000 = $63,000

From the above calculation, you can see that calculating the attorney percentage from either the gross or the net settlement can significantly affect how much the client finally receives from the settlement. Therefore, be sure to discuss the percentage in clear terms before you hire a personal injury attorney for your personal injury settlement.

Advantages of Contingency Fee Structure

Contingency fee agreements offer various benefits for both clients and attorneys, especially in personal injury cases where plaintiffs prioritize monetary compensations to cover damages. The benefits of contingency attorney fees are as follows:

  1. Contingency fees make legal representation more affordable for plaintiffs who otherwise might not be able to pay hourly rates.
  2. It reduces financial risks for the clients since they do not have to pay the attorney’s fees if they lose the case.
  3. Since their payment depends on the success of the case, attorneys are most likely going to be more committed to making sure their client wins so they can get paid.
  4. With a contingency fee structure, people who cannot afford legal fees upfront have the opportunity to sue someone with no money and pay the attorney fees later from their settlement money.
  5. Agreeing on the lawyer fees before hiring them gives clients a clear understanding of what to expect in terms of legal costs and helps them budget more effectively.

Disadvantages of Contingency Fee Structure

  1. Plaintiffs of cases with a low chance of winning or low potential payout may find it difficult to convince attorneys to take up their cases. This is because attorneys prefer to go for cases they believe they can easily win or cases with higher rewards.
  2. For cases with high settlement amounts, the fixed percentage for contingency fees may turn out to be significantly higher than what they would’ve paid in an hourly rate arrangement.
  3. If there is no clear agreement on whether the percentage applies to the gross or net settlement, disputes may arise especially in cases where the costs to be deducted are significant.
  4. If the case is unsuccessful, the attorney loses their payment.

2. Hourly Fees

Hourly Fees

Instead of agreeing to a fixed percentage of the settlement, some personal injury attorneys may prefer to charge a certain rate for each hour they work on a case. In some cases, the client will have to pay an upfront retainer, which is a lump sum that the attorney gets their hourly pay from as they work on the case. The hourly fee structure is common in cases where the outcome does not involve a financial award, such as family law disputes or business litigation.

3. Hybrid Fee Structures

A hybrid fee structure combines both the contingency and hourly fee methods. In a hybrid fee structure, an attorney might charge a reduced hourly rate and a smaller percentage of the settlement as a contingency fee. This structure is most common in cases where a client wants to minimize risks associated with higher contingency fees but is also willing to pay some amount upfront to secure legal representation.

Factors That Influence the Attorney’s Percentage of Settlement

Factors That Influence the Attorney's Percentage of Settlement

Under a contingency fee arrangement, how much an attorney receives from a settlement depends on various factors. You need to understand these factors to be able to negotiate for a fair contingency fee suitable for both parties.

One of the major factors is the complexity of the case. Complex cases involve more risk and require more resources than simpler cases. Your personal injury lawyer may need more extensive legal research and expert testimony for such cases, which implies a higher attorney percentage.

Secondly, personal injury attorneys consider the level of risk involved in the legal process before agreeing to a percentage. If you’re less likely to win your settlement, then the attorney might charge a high percentage to compensate for the risk of not getting paid at all should the case fail. In addition, the longer a settlement takes, the more time and resources you’ll spend on the case as an attorney, and the more the attorney is likely to miss out on other potential opportunities. Hence, attorney’s fees are usually higher for longer settlements.

The expected settlement amount also influences the attorney percentage. It’s easier for a personal injury attorney to accept a lower percentage when the settlement amount is high because the total amount the attorney will receive will still be substantial. For instance, an attorney may agree to 20% of a settlement amount of $800,000 (which equals $160,000) but may reject another case offering 35% of an expected settlement of $350,000 (which equals ($122,500).

Some attorneys also charge a “sliding scale fee” according to the stage of the settlement. For example, say the total settlement amount is $500,000. As an attorney, it’s possible to charge 35% of the first $300,000 recovered, 20% of the next $150,000, and maybe 12% of the rest. This arrangement helps protect the client from paying excessive legal fees at any stage of the case.

Note that some states in the United States establish state court rules that set a specific limit on contingency fees for a variety of cases based on the settlement amount. For example, the sliding scale for contingency fees in Connecticut is up to 33% of the first $300,000, 25% of the next $300,000, 20% of the next $300,000, 15% of the next $300,000, and 10% of amounts exceeding $1,250,000. This sliding scale applies to personal injury lawsuits, wrongful death, and medical malpractice cases.

Finally, the experience and reputation of an attorney also determine how much they charge. Experienced personal injury lawyers usually charge more than their less experienced counterparts due to their track record of success in getting favorable settlements.

Tips for Negotiating Attorney Fees in a Settlement

Tips for Negotiating Attorney Fees in a Settlement

Whether you’re going for a contingency fee basis, hourly rate, or both, you need to learn how to negotiate for a fair attorney compensation to manage legal costs effectively. Here are some pro tips for you.

First, make sure you understand the different fee structures that are obtainable. That way, you’ll be able to determine which fee arrangement is most suitable for your case and your budget too.

Then, find out how much personal injury attorneys usually take from a settlement in your area and for your type of case. If you don’t know the usual range, you might end up negotiating for an amount way higher than what you should pay. Therefore, consult with different attorneys to compare their rates, fee structures, and services offered.

Before you reach a contingency fee agreement, state clearly what the attorney’s fees cover. Let them understand the services you expect from them to avoid misunderstanding. Be sure to clarify who covers other additional court fees that may come up along the line. If you need a cash advance on your settlement, you can get a loan on your lawsuit by applying for pre-settlement funding.

If possible, also negotiate for a cap (upper limit) on the total fees. This can be particularly useful in high-stakes cases where the settlement might be substantial. For legal compliance, be sure that the agreed cap does not exceed the amount specified by your state law.

If the attorney percentage is higher than what you can afford, you can ask if they offer payment plans that would allow you to spread out payments over time rather than paying a large sum upfront. You can also ask if the attorney is open to alternative fee arrangements such as a hybrid model or a flat fee for certain parts of the legal process. These can sometimes offer more predictability and potentially lower costs.

Finally, carefully review the attorney fee agreement before you finalize your decisions. If there’s any part of the agreement you don’t understand, do not hesitate to ask questions. By approaching fee negotiations well-prepared and informed, you can often secure more favorable terms, reducing your financial burden while still obtaining the legal services you need.

How Legal Representation Helps You During the Settlement Process

How Legal Representation Helps You During the Settlement Process

Working with an attorney during your settlement can go a long way in helping you get a favorable settlement outcome. With their expertise and vast knowledge, an attorney understands the law regarding settlements. That means they can help make sure you follow all required legal procedures to avoid costly mistakes that can affect your claim negatively.

Attorneys also provide professional advice to help you make informed decisions. They can assess the strengths and weaknesses of your case from an objective point of view, giving you realistic expectations about the possible outcomes.

Moreover, lawyers use their professional negotiation skills to seek the most favorable settlement result for you. Proper negotiations are not just about knowing the right amount to propose, but they also depend on how well you can present your points, and this is one area that attorneys excel in. Their goal is to ensure you receive fair compensation that reflects the true value of your claim. They also make sure that your legal rights are protected throughout the settlement process.

Additionally, a lawyer assists you in preparing appropriately for your settlement. They will gather all necessary evidence, such as medical records, witness statements, and financial documents, to build a strong case. They will also draft and review all settlement agreements, ensuring that the terms are fair and in your best interest.

Learn More About Attorney Percentage of Settlement

The attorney percentage of a settlement determines how much attorneys take from a settlement as compensation for their legal services. The amount and fee structure is agreed upon by the client and their attorney to be sure the percentage is fair for both parties. Before you sign an agreement to confirm the percentage, make sure you understand how it works and how it applies to your settlement amount to ascertain that you’re choosing the right attorney and fee structure.

Meanwhile, you don’t have to suffer financial pressure while your case is going on. Stonewood Funding can provide you with non-recourse pre-settlement funding in Los Angeles to clear your medical bills and other pressing needs as you await your settlement. If your case has been resolved already but you’re still waiting for your settlement check to arrive, you can apply for our post-settlement funding to settle urgent needs before your settlement money reaches your hand. Have any questions on how you can apply? Book a free consultation with us today and let us help guide you.

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