What You Need to Know About a Contingency Fee Agreement

Working under contingency fee agreement may seem too good to be true. A lawyer simply agrees to represent you at no upfront cost, only collecting if you win the case – right? Though this is a bit basic, there is some truth to this definition. Like everything else in the legal field, however, each case is unique. There are some facts about contingency in Texas that may make your case not worth pursuing, even if your lawyer agrees to start for free.

How Contingency Works in Texas

When a lawyer agrees to work on contingency, which is common in personal injury cases, the plaintiff can hire an attorney without paying legal fees upfront. The attorney’s fees are simply deducted from the final award – usually 33% to 45% of the total settlement.

The Pros and Cons of a Contingency Agreement

Sometimes, the only way a person can seek justice is through a contingency program. That does not, however, mean it will be worth your time. You must carefully consider the final costs and most likely outcomes, accounting for each of the following issues before making your decision:

  • Tax considerations. You may not end up with the amount you believe you are owed – especially when tax season rolls around. The IRS will treat the settlement as though you received the total amount and paid your lawyer if your attorney receives a 33% or greater contingency payment. Remember to account for this and prepare for April 1 before signing a contract. This is a non-issue, however, if your case only addresses physical damage or if the suit is related to the operation of a business you own.
  • Additional fees. You must also scrutinize an agreement and poll your attorney with the right questions before agreeing to contingency. Regardless of the outcome, you may be stuck with filing fees and other charges (e.g., witness fees and depositions) related to court disputes. For example, if you agreed to a 33% contingency and settle a claim for $50,000, you may expect a $33,500 check in the mail. Unfortunately, additional fees can cost thousands of dollars, which is added to the lawyer’s initial $16,500 fee.  Additionally, medical providers must be paid back for the services they rendered.  It is not uncommon for claimants to receive less than half of the final award.

Contact a Texas Lawyer for a Personal Look at Your Case

With so much on the line, you must work with an honest attorney. When these professionals agree to contingency, they do run the risk of receiving nothing. They understand this, and in high-profile cases or those involving a large settlement, a contingency offer may just be offered to get you in the door. To avoid settling for less than what you are owed, you must know your rights, carefully review the contingency agreement, and know when to walk away. For more information on contingency and personal injury law in Texas, schedule a free consultation with Joe Lopez Law today.