The Flat Fee Divorce Gamble
It’s impossible to know how much a divorce will cost at the outset. Well, not impossible, but no attorney is going to pigeonhole themselves to a number clients will treat as gospel. “I just got your bill for $6,580…You told me this divorce would cost around $6,000. This is not $6,000!”
Cases that seem as if they’ll settle in two weeks can come unraveled. Dad suddenly realizes that mom’s idea of “reasonable” parenting time is one weekend a month. Mom, on the other hand, now understands that dad’s idea of “reasonable” parenting time is week on, week off. Other times, parties who come out with their cross-bows loaded, stretched, and aimed at the other’s heart suddenly become reasonable and settle when they get that second month’s invoice from their attorney.
This unpredictability lends itself to the traditional and most common way divorce attorneys charge – by the hour. More precisely, by portions of the hour. If the case takes four hours to resolve, the attorney earns four hours of pay and the client pays for four hours of the attorney’s time. If the case goes nuclear, the cost and pay is commensurate.
Fees have a way of quickly getting out of hand though. Moreover, unscrupulous and over billing attorneys have further caused divorcing parties to be wary of traditional fee arrangements. Over the past few years this has led to an up-tick in alternative fee arrangements, most commonly the flat fee divorce.
The flat fee divorce is music to a divorcing party’s ears – “This divorce will cost $5,000. No more. No less.” They know what they’re getting into. They love it. They eat it up like Sister Schubert’s at a church pot-luck.
For some, the flat fee divorce works out. Both they and the attorney walk away happy and satisfied. But make no mistake about it, the flat fee divorce is a gamble, for both the attorney and the client. If parties and attorneys want to take the bet, at least do so after understanding the risks.
The attorney is gambling that they’ll finish the case in fewer hours than they otherwise would have billed. Say an attorney ordinarily bills at $250 per hour, but for this case, they’ve charged a $3,500 flat fee. If they finish the case in fourteen or fewer hours, then they’ve won their bet. If, however, one of the parties goes bombastic and prolongs the litigation, after the fourteen-hour mark the attorney is essentially working for free.
A bombastic party may be in the cards in a flat fee situation, seeing as how flat fee clients have no incentive to settle. Frankly, attorneys’ fees settle cases. The husband who travels twenty nights a month for work comes off his idea of equal parenting time once he’s ran up a $40,000 attorney’s fees tab. The wife who’s demanding a new Audi from her postal worker husband comes around to the used Honda once the fees start adding up.
With the flat-fee, though, the client has paid what’s owed whether they settle in a week or have a three-week trial. They can take their insane ideations all the way to the judge. It doesn’t matter to them. They’re in for the same amount regardless.
From the client’s perspective, the reverse is true. If the case goes on after those fourteen hours are up, how much effort and dedication do you think the attorney will pour into the case once they’re essentially no longer getting paid? And, if the other spouse is paying their attorney by the hour, you best hope their attorney doesn’t learn about the flat-fee arrangement. I’ve intentionally waited out these types of cases before, biding my time until the flat-fee attorney no longer has the incentive to continue to fight. Suddenly, the flat-fee attorney starts convincing their clients what a great settlement offer I just sent over. On the opposite end, the client is still out in the rain. If things progress smoothly and the case settles in ten hours, then they’ve just overpaid by four hours.
Flat-fee attorneys’ fees arrangements can and do work in certain instances. The appeal of knowing exactly what you’ll pay is extraordinary in a day and age when a divorce can cost as much as a new car. Just understand the risk before you place your bet.
Click here for eight tips to keep your attorney’s fees low when your attorney charges by the hour.