An 8-part case study of an actual FITZGERALD & CAMPBELL, APLC client who did
Part Four – That All Sounds Good, But What Are The Fees?
Naturally, John had questions about the fees and how they worked. The fee itself is really simple: The fee is contingent. That is, there is no fee if there is no settlement. If we don’t get the job done, you pay us nothing. Zip, nada, $0. Pretty easy to understand. If we do get it done, we charge a percentage of the debt amount. Simple.
You also need to know that when you don’t pay your creditor, your debt balance is going to grow. However, our fee is based upon the amount due when you defaulted, not when you settled (which could be many thousands more).
What is complicated is you must save funds for the eventual settlement payment to the creditor and payment of attorney fees. And you must save enough to make a settlement possible. For example, if John were to save $200/mo it would take him 200 months (over 16 years!) just to save $40,000. That is not a realistic settlement plan at all. So, we had to get a Good Faith Estimate of what John would need to save in order to have a realistic chance of settling the $98k of private student loan debt.
We call this your anticipated “outlay”. We had to compute an estimate of how much this client’s outlay would be. In this case the roughly $100K of debt if settled for 40% would mean $40,000 would be needed to pay the settlement to the creditor. This client’s fee was 12%. 12% of 100K debt is $12,000. Therefore, the total outlay by client would be $52,000 (40k to creditor & 12K atty fee) to settle $100,000 debt (assuming a 40% settlement).
This client elected to save $2000/mo. That meant that the time estimate was 26 months to resolve the account ($2000/mo for 26 months equals $52,000 needed for estimated outlay). If he had saved $1000/mo the time estimate would have been 52 months. Again, keep in mind these are only estimates. In this client’s case the total outlay turned out to be much less (approx. $31K) as the settlement was much less than 40%! The reverse could also be true: if settled for 50%, the outlay would have been closer to $62K.
Again, John understood the math. And most important, the money he saved was 100% his money. There were no “monthly” or “escrow” fees. If at any time he wanted the money back, all he had to do was ask. The money is placed into an attorney/client trust account that is regulated by the state bar, so it is completely safe.