Fees

Over the years, I have become more and more in favor of flat fees as opposed to fees based on a percentage of savings.

Most commercial debt resolution specialists will charge a fee of 35% of the amount they save a client on a debt. If they save a client $10,000, their fee will be $3,500. (The 35% figure probably stems from the practice of attorneys charging 1/3 of the amount their client collects in a lawsuit.) I have three problems with this practice in our business. First, the percentage is too large and depletes the actual savings to the client far too much. Second, it has the potential to create a new problem debt for the client. Third, the fee is completely unknown until negotiations are finished and could be an unpleasant surprise to the client.

When a creditor's attorney charges 1/3 of the amount they collect from a debtor, they simply shave that amount off the funds as they are received with no out-of-pocket cost to their client. When debt negotiators collect 35% of the amount they save a client, the funds must come from the client's pocket... even as the client pays whatever settlement is negotiated.

For these reasons, my preference has become the flat fee for most cases. There are no surprises and the client must still approve any settlements before they are accepted. I also have found using a flat fee gives me an edge over my competition. There is a very simple calculation I use for my flat fee cases and I am happy to share this with any of my students. Please feel free to contact me.

However, I still use percentage fees for some cases such as debts tied to a business and / or real estate being sold. These fees will come from the proceeds of the sale with no out-of-pocket cost to the client. They can also be extremely lucrative providing revenues in the tens of thousands of dollars.

Scott F. Soape