Non-Traditional Unsecured Debts: Attorney Fee Disputes

Debt comes in a lot of different forms. From car loans to credit cards, home mortgages to business obligations, no matter how it started, it can become a challenge if you owe more than you can pay. Whether you got legal help with a divorce, a property dispute with a neighbor, or a contract dispute at work, attorney fees that remain unpaid can lead to collections actions against you. Attorney fees become an obligation that adds to your total debt burden if you seek legal help, and then the fees add up to more than you could pay throughout the process, leaving you with a large bill.

The law separates debt into two main categories, called secured and unsecured. Secured debt is attached to something of value, called collateral, while unsecured debt doesn't include any collateral that the creditor can come after if you don't pay. Common examples of secured debt include car loans and home loans, where the collateral is the thing you're buying with credit, like the vehicle or the house. Businesses may have secured debt when the business owner signed an agreement to give the lender a right to come after business assets, like equipment or inventory, if the debt isn't fully paid.

Unsecured debts have no collateral connected to the loan. If the borrower doesn't pay all the money that's due, the creditor has no right to seize any property to try to make up for the money owed. Because it doesn't have the security of a valuable item backing the promise to pay, unsecured debt often has higher interest rates. The lender knows that it may be more difficult to collect all the money if the debtor doesn't pay, so they make more money on the amount it costs to borrow, which is the interest. Often, an agreement you sign with a lawyer for professional services includes a statement of the interest rate you will pay if you don't pay the amount due in full when requested.

In most cases, attorney fee agreements are an example of unsecured debt. When the lawyer agrees to help with your business or personal legal issues, you sign an agreement that says you will pay their fees for the work they do on your case. If you get to the end of your legal problem, whatever the outcome, and have more legal bills than you can pay right away, you owe that debt to the law firm.

Even though it is an unsecured debt, you are responsible for paying for the lawyer's work. Because it is unsecured, though, the law firm can't just take some valuable property that you own to satisfy the debt. On the other hand, though, just because they say you owe a particular amount, they don't necessarily have the right to collect the entire amount that they claim is due. You have the right to see the original agreement that the fee dispute is based on, including their accounting of fees and services rendered, so that you can verify for yourself whether the amounts claimed are correct or not.

There are a few options available to you when faced with an attorney fee debt. You have rights under California law to request a written statement of the debt and supporting documents that they claim establish their right to collect the money. Some of the defenses that may be available to you in contesting the claim include:

• Statute of limitations: California law puts a time limit on a creditor's right to take you to court to collect a debt. Generally, the statute of limitations for most types of debt is four years. Debts on an oral contract, though, must be brought to court within two years, or they'll be excluded from court. Once the creditor has lost the ability to take you to court after the expiration of the statute of limitations, the debt is essentially uncollectable, but the default will still show up negatively on your credit report.
• Disputed Fees: It is possible to challenge the amount of claimed legal fees that they say you owe by presenting facts that show that the claimed attorney's fees are unreasonable or incorrect. The California State Bar offers an alternative to going to court to battle over the legal fees with their Mandatory Fee Arbitration program that a client can request (and to which the attorney is required to agree to participate).
• Factual Errors: Recordkeeping errors happen. If you review the records of the debt supplied by the creditor and discover errors of fact (like service dates that are out of the range of when you worked with the attorney, for example), you can bring these up in your defense to some part of the amount claimed as due.

If you refuse to pay, or you're unable to pay, you may face collection actions. Often, the original creditor (such as the law office that did the work) might transfer or sell the debt to a collection agency. In that case, you have a different party to deal with than the law firm that worked on your case. Collection efforts are limited by federal and California State fair debt collection laws to include telephone calls during daytime hours (unless you've requested that they not contact you by phone) and letters to your home requesting payment. The outside of any envelopes they send to attempt to collect the debt can't include details about the alleged debt or anything designed to embarrass or shame you about the money you may owe on the outside of the envelope where the public can see them.

Debt collection and threats of court action can be intimidating and overwhelming. Skillful and compassionate debt resolution attorneys will take your side in the dispute and defend you against unlawful or threatening collection actions. The lawyers at Fitzgerald & Campbell, APLC have worked to help Californians resolve debt problems for over thirty years. Our work has saved our clients millions of dollars of debt.

We have a team of caring, problem-solving legal professionals who know that those debt problems can feel very stressful. We focus our work exclusively on consumer and small business debt issues, so you can be completely confident that we are on your side from the start. Reach out to speak to an attorney today to see how we may be able to help you eliminate your unsecured debts. Call us at (844) 431-3851 or contact us online.