You do a decent book of business each month, feeding yourself and your family. You’ve got a good stream of clients coming into the office and, though they drag their feet on paying their legal fees, most of them end up paying sooner or later.
Is it time to raise your fees?
Don’t tell me the competition will eat you alive – if all you have to compete on is price then you’re always going to lose. It’s a race to bankruptcy because someone can always charge less money (unless you’re doing it for free, which is unlikely).
I’m focusing solely on Chapter 7 bankruptcy legal fees because those are the fees that typically aren’t subject to some arbitrary “no look” fee imposed by the court. Some places have “no look” fees for Chapter 7 cases for my friends who practice there I say, “time to make waves with your court.”
So let’s keep it in the Chapter 7 arena.
Doesn’t a low fee send a message to your potential clients about the value of your services? And in so doing, doesn’t it put you at a disadvantage? Aren’t you just like the kid who got his lunch money stolen every day?
Some big-box stores compete solely on price, stocking enormous stores to the gills with cut-price goods. For some things that’s fine – tube socks aren’t measurably better at $10.99 than they are at $4.99. But would you ever go into one of those places and expect to pick up a tuxedo to wear to your wedding? Probably not.
When you’re pricing your services – even a below-median Chapter 7 bankruptcy – at the bottom of the price spectrum you’re going to bring in clients with a different set of expectations regarding your value. They are more likely to see you as a commodity, not a specialized high-end professional.
When that happens, the respect you get as a professional is less than what might otherwise be the case. I’m not talking about getting a client who bows and kisses your ring, I mean someone who takes your advice seriously, a client who provides documents in a timely manner. In other words, someone who respects your time and efforts.
Most Chapter 7 bankruptcy cases can be had for about $2,000-$2,500 depending on where you practice. Lots of bankruptcy lawyers stop there, never taking into account the amount of time it takes to handle even a routine case of this sort. Client meetings take a few hours, the meeting of creditors takes a few hours, drafting the petition and reviewing it takes a few hours, mean testing analysis takes some time, sending required documents takes some time …
And before you know it, you’re looking down the barrel of 15 hours to handle even a below-median, routine Chapter 7 case.
Then you need to look at overhead, the cost of hiring people to do the work that needs to get done. The cost of having space for those people. Keeping the lights on. Stuff like that.
If you know you’re barely making ends meet then you know you should raise your rates. If you don’t, even a small reduction in the number of Chapter 7 cases you handle could spell disaster for you. Remember 2006?
Still, there are lots of reasons why people don’t raise their Chapter 7 fees to a level that provides them with fair compensation for the job they’re doing.
I’d like to hear about why you haven’t done it. Drop a comment below and let’s figure out the roadblocks.
Photo courtesy of in da mood.
I have steadily raised rates because filing cases at a loss is not my idea of good business. As rates increase, the number of people looking to file here has not changed. People know what they get with me and stick with it. Those that pay more know they are getting great service as I am NOT a cookie cutter attorney.
Our "no look fees" for Ch7 are only $800-950 (indiv-joint) & the only way I seem to get any new business that's not a referral from a client who already knows what great work I do is to be $100 less than the many BK attys surrounding me. But, I only need 12 filings a month.
Well done, Mitchell. If your fees reflect your value then the fee is a fair one.
In that case, the way for someone to steal all of your business is to be $100 less than your fees. It's always a race to the bottom, and the only way to get off the treadmill it to establish your value and expertise in the marketplace.
I moved from a firm that charged $999 for BK 7 to one that charges about $2K-$5K for BK 7 depending on situation. You are right on with the client's expectation. I have seen both sides, and let me tell you, my current firm is 100x better than my last. Our clients are responsive and overall my current firm has outstanding reputation, especially with the local trustees (which makes a huge difference). Fees do reflect the quality of the firm.
After looking at filings to see the going rate here in Nor Cal, we're charging between $1100 and $1400 for most 7s. There are certainly people charging less. We know there are many local attorneys charging much more. But, we're new on the scene in the area, and we select cases that aren't overly difficult. We often wonder how people facing bankruptcy are affording attorneys who are charging $2500+ – as it is, clients wonder how they can come up with the $1kish that we're charging. Thanks for the topic – we're interested to see others' perspectives.
I am an associate at a Consumer Bankruptcy Firm. We advertise and compete on a fee basis with a "starting at xxx" in our advertising. I don't agree with this approach and I tend to agree with your post. However, I do find that many of our Chapter 7 clients are EXTREMELY "cost conscious" so I am torn. Some are calling around to local attorney just to find the cheapest fee.
Not surprising that your clients are the most cost conscious out there. Your firm's advertising strategy guarantees that. Wouldn't it be better to devise a strategy that allows those clients to self select away from using your firm? That way, you could be focusing on the ones who are willing to pay more to get better service. My firm hasn't figured out the perfect amount to charge either, but one thing is for sure – we aren't interested in being the lowest price in the market.
This is such great advice.You should NEVER compete solely on price. In business school this is called the Bertrand trap. If you are in fierce price competition you will simply drive yourself out of business.It helps to look at some actual numbers to drive this point home. It is an important business concept that if you drop your fees by a certain percentage, you will actually have to raise your business by a larger amount of business just to stay where you were before the discount. So, for example, realize that when you drop your fees by 33%, you will need to actually add 50% more clients to keep the same amount of gross income. Let's say that you were charging $1,500 per case and doing 10 cases per month. That would be a gross income of $15,000 per month. If you dropped your fees by 30% to $1,000 then you would need 15 cases per month (an increase of 50% above the 10 cases per month) to bring in that same $15,000. And handling those extra cases are definitely going to add some overhead or extra hours on your part.So, would you prefer to do 10 cases per month or 15 cases per month and keep the same income? I would opt for the 10 cases.In addition, you will need money to advertise. So I recommend charging a reasonable rate, differentiate yourself by service and recommendations, and put some more money into marketing. In the long run, you will win the battle and build a great book of business.Don't sell yourself short.Victor PalmeiroMaryland Bankruptcy Lawyer <a href="http://www.marylandbankruptcyattorneys.org” target=”_blank”>www.marylandbankruptcyattorneys.org
chapter 7 give you benefits If you have no property to lose, chapter 7 bankruptcy will provide you with an opportunity for a fresh or new start.By filing Chapter 7, you can see how to correctly manage you money so that you save yourself in so much trouble….!!! i think its good option for you…!!!!!!!!!!
chapter 7 give you benefits If you have no property to lose, chapter 7 bankruptcy will provide you with an opportunity for a fresh or new start.By filing Chapter 7, you can see how to correctly manage you money so that you save yourself in so much trouble….!!! i think its good option for you…!!!!!!!!!!
Wish I could get $2K- 2500 on a typical below median debtor. I will say that I think I am ready to raise my fees on ABOVE MEDIAN cases since at least 1/2 of them end up with the UST for review. We have thresholds on car payments, people with Catholic school, high medical, etc. The review with the UST can often be a waste of time for these clients, but you have to go through it just the same. The UST is just doing their job. I am going to start requiring the debtors to have proof of these expenditures all ready for the UST before filing.
I am wondering if many people throw out the "no look" for more complicated Chapter 13s. I sure have been burned by several clients lately due to their failing to get on track with payments or just having complicated situations. Doing a detailed bill on a bankruptcy takes time for sure. Still, it may be worth it. Anyone waive "no looks" on a regular basis?
The other thing you might find is that the low fee may attract easier cases. I guess it depends on where you are advertising. My fellow attorneys who do a lot of TV ads think they get more "meat and potato" clients. Where I do most of my advertising on the internet I end up with more professionals who have more complicated cases. Also, my experience with internet clients are they are a little more time consuming in the amount of time they want to demand. They don't always trust you to do your job and maybe they are used to being in control. Now their life is out of control and they are struggling with it to a greater degree.
Interested to know if people have a lot of clients who start the process but don't follow through for some reason– now they want ALL their money back. They can't understand that you should be paid for your time. Any suggestions on improving client relationships in this area?
I am wondering if many people throw out the "no look" for more complicated Chapter 13s. I sure have been burned by several clients lately due to their failing to get on track with payments or just having complicated situations. Doing a detailed bill on a bankruptcy takes time for sure. Still, it may be worth it. Anyone waive "no looks" on a regular basis?
I'm thinking about offering BK services, but my hangup is the fee. I've seen several other attorneys in the market that advertise $1000 to file. I don't know how they could make any money. This appears to include the court fees as well and the BK court is a couple hours away. I've done petition prep before and it is pretty time consuming. Are these fees for everything up to the 341 meeting? Are amendments or responses to trustee objections additional? I realize that it is subjective according to the fee agreement, but what does the "typical practice" do?