Today’s 3-in-3 Topic is: What Costs Should I Expect with Attorney Collection Efforts?
“3-in-3” is a 3 question, 3-minute interview with an NCS colleague.
Today we sat down with NCS Client Account Manager, Danielle Moon, to discuss attorney collections and the fees you can expect regarding court costs and suit fees and whether or not you can recover these fees from your customer.
“Could you please explain the process of court costs and suit fees and how they differ?”
Danielle: The attorney will exhaust all amicable efforts to collect the balance prior to recommending suit. They will require the creditor to advance court costs and possibly suit fees, to proceed
The court costs are used to establish and maintain the suit, including filing the complaint, service on all parties, and any necessary motions. The costs are set by the state, vary by jurisdiction, and are non-negotiable.
The suit fees, by industry standards, are an overall contingent suit fee taken only if funds are collected after suit is filed. Some attorneys will combine a contingent suit fee with a non-contingent suit fee which is a non-refundable fee to initiate the suit. It is above and beyond the court costs and the contingent fees, and the attorney is entitled to this fee as an officer of the court.
“What factors do attorneys typically look at to determine if they’re going to charge a non-contingent suit fee?”
Danielle: There are simple factors that may cause the attorney to ask for the fee.
- If a dispute exists
- If the attorney believes the suit will lead to an uncollectible judgment
- If the debtor is in an area with limited legal resources or
- Some attorneys have that “we’ve always done it this way” mentality, and will always ask for the fee.
The non-contingent suit fee is usually calculated as a percentage of the claim amount, or a flat fee. For example, with a $10,000 claim, you might be asked for a $500 non-contingent suit fee plus court costs.
“Can some of these fees be passed on to the debtor like interest charges and collection fees?”
Danielle: Absolutely. That is the most common question we get from our clients. When the attorneys file suit, they always ask for interest, costs, and fees based on the client’s credit application, contract, or the statute.
Once a judgment is entered, the debtor is responsible for those fees. Though it’s not likely they will be paid, they are very useful in settlement negotiations. It often comes down to the time value of money. Do you want to get paid your full judgment over time or take a lesser lump sum now? We’ve had clients who settle at a discount, such as $320,000 paid on a $335,000 claim, rather than go through lengthy, costly litigation…and clients who settle at a $10,000 lump sum now rather than taking the chance a debtor is going to pay a $15,000 judgment over time when they are struggling to keep their doors open.
- When looking to file suit, the costs vary by jurisdiction and state.
- Attorneys may charge a non-contingent suit fee, which will vary by the attorney and the specific case. It’s typically charged as a flat fee or a percentage of the full amount.
- Fees can be passed on to the debtor, but look at the time value of money. Does it make sense to continue to chase a balance if you can settle for slightly less, as opposed to going through a lengthy litigation?
Please remember, every situation is different. If you have any questions, please do not hesitate to contact NCS! SecureYourTomorrow@ncscredit.com, 800-826-5256