Most bankruptcy lawyers who file Chapter 7 and Chapter 13 petitions charge flat fees for their services. It’s a function of the marketplace, the consumer’s expectations, and the attitude of the judiciary with respect to the field of law.
I think that’s a good thing – the consumer has a clear expectation of the fees, the lawyer knows what each case will pay, and the world turns on and on.
The problem, however, is when lawyers fall victim to using their fees as a means of marketing their practices.
If you seek to charge less than the competition, you run the real risk of having to do the work for free. We can use my personal experience as an illustration. When I went solo in 1995 I reasoned that lawyers charged too much for their services and that I could do it for less. So I promptly began advertising Chapter 7 bankruptcy legal fees at $495 including filing fees (remember, this was 1995) – about $50 LESS than my nearest competitor.
Soon, my appointment book was filled with people who were going to file for bankruptcy with me. I was elated, until those clients walked in the door. Not only were they difficult to work with, they expected the moon and the stars for free. Hourly phone calls, paperwork being produced in dribs and drabs, and unwilling to follow directions.
But I was making money, right? Life, I thought, was good.
That is, until some started advertising $475 bankruptcies. And my appointment book dried up.
So I went to $450.
You know where this is going, right?
Welcome to the race to the bottom.
Finally I was charging $425 for a Chapter 7 bankruptcy. I was working like a dog. My phone lines were burning up. Clients were constantly angry, and so was I.
Then a lightbulb went off. One day I walked into the office and raised my fees to $600 for a Chapter 7 bankruptcy (by now it was 1997). And I stopped advertising the fee altogether, stressing instead the solution I was providing to my clients.
That’s right, I raised my fee by 41% overnight. On a whim, actually.
For the first four hours of that day, my phone was dead silent. I started to sweat.
In fact, the the first month my book looked a little . . . empty. I thought about lowering my fees back to $425. But then I looked at my list of new clients.
Sure enough, the number of clients had dropped by 30%. But my fees had gone up by 41%.
Let’s see . . . 70% as much work for 11% more money.
Even better, my clients were different. They were more reasonable, more realistic, more willing to respect my time and efforts on their behalf. They valued me as a $600 lawyer rather than as a $425 lawyer.
Then it hit me that when advertising fees I could never win long-term. There would always be some young hot-shot who would undercut me, some big money volume filer who could take a $0 down Chapter 13 case and not feel the burn when the case cratered pre-confirmation, some Chapter 7 lawyer who would play fast-and-loose by taking all of his legal fees post-petition (I know it’s illegal and unethical, but we also all know there are many lawyers who do business this way).
So rather than fight the low end, I fought the hgh end. I provided a better level of service, paid more attention to my clients, developed a marketing plan that focused on the benefit rather than the price. In return, I made more money and had fewer hassles.
The next time you think about your legal fees, remember my story.
