With the stock market gyrating and the economy sinking, many lawyers are already starting to see clients fall behind on paying their bills. Here are a few ideas for managing fee collection through troubling times…
With the stock market gyrating and the economy sinking, many lawyers are already starting to see clients fall behind on paying their bills. Â Here are a few ideas for managing fee collection through troubling times:
First of all, and to put the strategies below in context, make contact with your clients, particularly the ones who have typically paid their fees. Everyoneâ€™s nervous about the economy; you are one of their trusted professionals. Call them. See how theyâ€™re doing. Find out if there is anything you can do for them. Give them your ear. Donâ€™t bill them for the call.
Now is not the time to let invoices sit around unsent. Â Yes, your clients maybe hurting financially, but they need to know what the status of their bill with you is. A big surprise later certainly wonâ€™t help. Â If the clients have many bills, you need to make sure youâ€™re figured into the mix. If clients donâ€™t see a bill from you, they may think they donâ€™t owe you anything or that your bill can wait a couple of months.
Take a look at your clients who are more than 90 days behind on their payments. With a down economy, some of the clients who have not been paying never will. Take a look at those clientsâ€™ cases and determine whether there are any you would be better off withdrawing from.
You need to find the files that have no pending discovery or trial deadlines, venued in state court rather than federal court (because you may not be allowed to withdraw from federal court because of unpaid fees), and may require a lot of uncompensated work if you donâ€™t make some tough decisions. Make sure youâ€™ve asked for payment first.
For clients who are less than 90 days behind, call or write them. Â Donâ€™t ignore their overdue bills and donâ€™t threaten them either. Just remind them that youâ€™ve done good work for them and that you need to be paid. If you ask for a partial payment or a payment plan, they may appreciate your flexibility and you might get some money that would otherwise have gone to their other creditors.
If you sometimes begin a representation without an advance retainer, start requiring one, and if you currently get retainers, set the initial retainer higher. By making better use of advance retainers, you are reducing your risk of nonpayment in the future, which may help balance out the slow payments by some of your current clients.
Line up liens
In many states, a lawyer can assert an attorneyâ€™s lien against a clientâ€™s property that was the subject of the lawyerâ€™s representation, which can be an effective way to ensure collection of a lawyerâ€™s fee. But a lawyer can lose his or her right to the lien by not following the technical requirements regarding notice and filing.
In Minnesota, for example, an notice of intent to claim an attorneyâ€™s lien on a clientâ€™s real property must be filed within 120 days of the last work the lawyer performed on behalf of the client. If the notice is not filed on time, the right to claim a lien is lost.
When dealing with clients who arenâ€™t paying, remember that a fee dispute with a client that escalates may leave you with a conflict of interest. Lawyers cannot sue a current client over fees. Stress over a clientâ€™s nonpayment has led more than one lawyer to do or say things that violate the RulesÂ ofÂ ProfessionalÂ Conduct.
If you believe that an existing client owns property that could be used as security for your fee, treat any request for a security agreement as a business transaction and follow the ethical rules (ABA model rule 1.8(a)), especially giving the client an opportunity to consult independent counsel about the transaction. Â The same goes for converting an hourly fee agreement into a contingent fee arrangement or asking a client to sign a confession of judgement.
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Like you, I get many solicitations to join bar associations and sections and attend CLE seminars. County bar, state bar, ABA – one could easily make a full-time job out of bar activities. Now I’ve learned that there is a bar association that exists almost entirely in cyberspace: the Second Life Bar Association.
Second Life, as more thoroughly described in a California Lawyer article, is a virtual world (some would call it a game) in which you create an “avatar” for yourself with a unique name and looks you design and venture forth to chat with others, play games, create and sell virtual products, and heavens knows what else.
Like you, I get many solicitations to join bar associations and sections and attend CLE seminars. County bar, state bar, ABA â€“ one could easily make a full-time job out of bar activities. Now Iâ€™ve learned that there is a bar association that exists almost entirely in cyberspace: the Second Life Bar Association.
Second Life, as more thoroughly described in a California Lawyer article, is a virtual world (some would call it a game) in which you create an â€œavatarâ€� for yourself with a unique name and looks you design and venture forth to chat with others, play games, create and sell virtual products, and heavens knows what else. Â Members are under no obligation to look or act like their real life selves; escapism and role playing seem to be a big draw for Second Life. Some people, on the other hand, just want to be themselves.
Which brings us to the lawyers, a handful of whom have decided it would be cool to form a bar association in the virtual world.Although it sounds like the lead-in to a lawyer joke, like any bar association the SLBA gives lawyers (and law students and maybe lawyer wannabes) with similar interests the opportunity to connect with each other. Â In the case of SLBA, the lawyers may reside anywhere in the world (I would admire the dedication of an Asian lawyer willing to get up in the middle of the night to go to a bar meeting).
There is a certain thrill that comes from creating an organization from scratch, without having to pay allegiance to the pillars of the real world bar. The SLBA is trying to figure out how to provide credentials to its members (who might otherwise remain anonymous), what roles lawyers might play in a virtual world without a court system, and of course get some CLE credit, which California has granted (last weekendâ€™s seminar: Legal Research on the Internet). Â The SLBA posts transcripts of its meetings on-line, which gives a better idea of what is going on and when they are having additional CLEs.
Be warned, Second Life is not for the faint of heart. If you have difficulty figuring out how to add a website to your browser favorites, best to let it alone. Thereâ€™s a learning curve and it helps to have a mentor (fortunately, Second Lifers are a friendly sort, once you get past their avatarsâ€™ â€“ahemâ€“ unique appearances). The interface reminds me of those 3D home design programs you buy before you hire an architect. And although a basic membership is free, thereâ€™s a monthly cost if you want to buy land, get new clothing, etc.
As a networking tool, Second Life has limited appeal to me personally. Itâ€™s very time consuming to figure out and if you donâ€™t get some new virtual clothing, you look like a dork (albeit a young, thin, muscular dork with a full head of hair). Â I missed the virtual CLE last weekend because the demands of First Life cannot be placed on pause. I also think thereâ€™s plenty of important work to be done locally in the real world, both for local bar associations and other organizations, and probably a bigger return for your networking investment.
But for others, I can see where the Second Life Bar Association would meet many of my informal rules of good networking: Â sign up for activities that you enjoy for their own sake, find ways to demonstrate your skills and good sense to others, and expand your contacts beyond the narrow world of your current group of friends and associates. If youâ€™re heavily into the internet or technology or IP, or youâ€™re just looking for a new set of friends, the SLBA may be for you.
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One difficulty in representing clients who are “under water” on their mortgages is how the lawyer should get paid for his or her time negotiating a better deal for the client.
The client is heavily in debt, but if the lawyer shines, the client could save tens of thousands of dollars. In a listserve post this week, Professor Andrew Perlman asked: What if the lawyer was paid by taking a percentage of the money that the client saved through renegotiating the mortgage?
One difficulty in representing clients who are â€œunder waterâ€� on their mortgages is how the lawyer should get paid for his or her time negotiating a better deal for the client. The client is heavily in debt, but if the lawyer shines, the client could save tens of thousands of dollars. In a listserve post […]