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Contingent fee

You need to understand what a contingent fee is. Here’s what to know.

What is a contingent fee?

A contingent fee is a charge that is paid once a specific legal outcome occurs, such as winning a lawsuit.

Deeper definition

In legal terms, a contingent fee is usually paid to a lawyer if certain conditions are met, such as a settlement reaching a satisfactory conclusion.

In this case, the lawyer often agrees to accept a certain amount or percentage of the settlement or recovery in lieu of payment. If the case is won, the lawyer gets the agreed-upon amount.

If you lose the case, the lawyer gets nothing and you are not required to pay the attorney for any work he or she did. Regardless of the outcome, you are still responsible for any court fees and charges, unless they are included in your damages upon winning.

Contingency fees are not available for all areas of the law. Areas of the law where contingency fees are available include:

  • Any type of vehicle accidents, including automobiles and boats.
  • Work accidents and other personal injury cases.
  • As a part of the Fair Debt Collection Practices Act for violations by creditors in harassing debtors.
  • Cases involving a defective product that caused injury.
  • Disputes between employees and employers over hourly wages.
  • When collecting a large debt.

Typical contingency fees range from a low of around 15 percent to as high as 50 percent. For the most part, people who hire a lawyer on contingency often lack the necessary funds to pay the lawyer outright, although this is not always the case.

Example of a contingent fee

Contingent fee agreements usually take place in pursuing damages suffered in an automobile accident.

The defending party is the one at fault in the accident, and the plaintiff is the one suing for damages due to injury, property damage or even death. In this case, if the plaintiff wins the case, the lawyer gets his percentage of the settlement, with the plaintiff getting the rest.

Don’t know what to do with a windfall from a settlement? Use an investment calculator to see how your dollars can add up.

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