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When I was a brand-new attorney, an older fella told me that when people ask me how much their divorce would cost, he would respond, “Your divorce will cost as much as a car. The type of car depends on the type of divorce.” While his response was not helpful, it is very honest.

Many terms are used in attorney billing. This article is intended to help you understand the terms, benefits, and drawbacks of billing models.

HOURLY BILLING

Hourly billing requires a retainer. A retainer is a check, usually for several thousand dollars, that are held in an attorney’s bank account. That amount becomes smaller every time the law firm works on your file or pays a fee related to your case.

Every month or so, you should get a statement that shows the exact charges related to your case. Your retainer fee will be reduced by the amount of expenses and hours put into your case. If your case concludes before the retainer is completely used, you will get the remaining balance refunded to you. If your case is not complete by the time your retainer fee is exhausted, you will either be asked to deposit additional funds to your account, or you will be sent a bill every month that you are expected to pay.

Almost all hourly billing firms use a “minimum billing increment” method. This means that they bill in slotted amounts (1/10th of an hour, ¼ an hour). For example, if you have a four-minute call with an attorney that bills by the tenth of an hour. (.1), you are billed for six minutes.

Example
Joe is divorcing Jane. Joe meets with an attorney, explains the case to the attorney. The attorney recognizes that there are several complicated issues in this case and requests a $7,000 retainer. The attorney tells Joe he bills at $400 per hour.

After a month, Joe receives a statement from the attorney. The attorney has billed his hourly rate for phone calls with client, drafting forms related to the case, and representing Joe at a hearing. Joe now has $5,000 left in his account.

Three months later, the law firm sends a communication to the client stating the retainer fees have been exhausted, and requests the client deposit more funds so work can continue. Or, the attorney sends an invoice stating retainer has been used and now the client has accumulated $900 in fees after the retainer, and asks this be paid within 15 days.

Pros of Hourly Billing: You know what the attorney is doing to earn your money. You control much of your billing (be organized, concise, and only reach out to your attorney when necessary).

Cons of Hourly Billing: Unlike fixed fee (below), you don’t know your worst-case scenario. You may feel like when you call the attorney that you are rushing because you are watching your time.

FIXED FEE BILLING

Fixed fee billing is becoming more common in family law. Under a fixed fee agreement, the client pays the attorney for a certain amount of time. When that amount of time is exhausted, the client then pays an additional fee. The attorney does not keep track of their time while working on your case.

Fixed fee agreements can be complex, so make sure you carefully review the fee agreements, and be prepared to know when additional fees would become due. If there are additional fees that could become due, think about if those things could happen in your case.

Example:
Joe is divorcing Jane. Joe carefully reviews his fixed fee agreement. He sees that $9,000 covers six months of legal representation. Joe makes a complete payment for $9,000. His divorce settles in month five. Joe is done paying his attorney and is now divorced.

Example Two:
Joe and Jane are unable to reach agreements on custody and placement. A guardian ad litem is appointed to represent the children’s interests in the divorce. The guardian ad litem is investigating the divorce. Joe’s six months is expired in the divorce. The law firm cites his fee agreement and tells him additional $9,000 is due for another six months of representation. Joe pays an additional $9,000.

Pros of Fixed Fee: You know on your worst day how much your divorce will cost. The client may not feel like they are on the clock when they call the attorney.

Cons of Fixed Fee: You cannot see how your money is being used (no statements). Your divorce may be more simple than the fee you pay.

OUR POSITION

I have practiced under both fixed fee and hourly models. I believe both models provide benefits and drawbacks to the client. Both models require the client to trust that their attorney will keep their word. In hourly, they are trusting that their attorney will bill honestly. In a fixed fee model, like described above, they are trusting that their attorney will perform the amount of work that merits their fixed fee.

Our firm uses an hourly model. While we see the benefits of fixed fee billing, we believe hourly is the most transparent and fair. We believe the client should know and see where their money is being spent. We believe that if the case has certain delays outside of our client’s control (court calendars, unresponsive opposing attorney, or a lengthy guardian ad litem investigation) they should not be punished for those delays. We believe that there are certain things we can control in a divorce, and often, timing is only within certain limits of our control.

We hope this helps you in your decision making!