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Posted by Michelle May O'Neil on August 15, 2011

It is not unusual for clients to complain about their attorney fees for a divorce. Below you can find some of the different ways that attorneys charge for handling the divorce process. This may help clients understand the billing process and perhaps what their best option is when it comes down to hiring an attorney.

1. Flat Fee:

A recent blog put forth the idea that the best way to bill is on a flat fee basis. There are merits to flat fee billing if each case can be processed very quickly with few court appearances. In most instances, a flat fee billing is neither fair nor reasonable to the clients or the attorney. If a flat fee is high the client is often charged more for services than is justified in his or her divorce. If the flat fee is low the attorney may not be providing full or adequate services, and if problems arise they often will not be properly dealt with. If the client calls every day knowing that he or she is not going to be billed for it this can encourage a lot of wasted time. In those instances the attorney may not be handling the case as thoroughly as necessary or giving all the time that should be devoted to a particular divorce case. If problems arise and what starts out as a simple case suddenly becomes complicated then the flat fee arrangement can turn into a disaster for everyone.

2. Hourly Billing:

This is the most common fee arrangement. In many practices, an attorney will bill on an hourly basis against a retainer. Some attorneys will take the position that the retainer is just to retain the attorney and then the fees on an hourly basis are billed on top of the retainer. In the past when the economy was good and people weren't hesitant to spend large sums of money on legal services, that might have made sense. In these tough economic times that makes no sense at all. What is normally done is charge a retainer and then an hourly rate against the retainer. If the case is simple, with few problems, the retainer will cover the entire fee. If problems arise or a lot of time goes into the case, then an hourly rate will be billed once the retainer is used up. Some ways for clients to save money when operating on a retainer basis: maximize time, do not call every day, raise several questions at once and utilize the firm’s support staff or associate in many instances, to maximize the amount of legal services and minimize the fees involved. Hours are normally divided into increments. Some attorneys bill in quarter-hour increments, and others in a third of an hour or a tenth of an hour. Any correspondence or work done on a file is billed upon these time increments. This includes phone calls, e-mails and court appearances. Some attorneys will bill a minimum of one or two hours for court appearances. Driving time is usually billed as well. When you meet with an attorney you should discuss the fees carefully and find out exactly how the billing is done and what is the standard practice for that attorney.

3. Unit Billing:

Some attorneys are using what is called "unit billing," which means that they bill not for time but rather for units. The argument for unit billing is that as an attorney becomes more and more experienced with more work on the computer, work that might have taken an hour or two can be done in a quarter hour or less and therefore unit billing is done because an attorney who is more efficient and experienced should not be punished for his/her efficiency or expertise.

4. Value Added:

Another means of billing which is frowned upon more and more is what is called "value added," where if there are exceptional results on top of the hourly billing or retainer there will be some type of bonus at the end.

As you can see, in family law there are many ways to bill. The critical thing at your initial consultation is to make sure you understand how you will be billed and also make sure that everything is spelled out in writing. You should always have a written contract or retainer agreement with your attorney, so that if there are problems or issues in the future it is all clearly spelled out.

Hat tip to Henry Gornbein for his May 27, 2011 post

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It seems like its everywhere.... reports that divorce rates are down.  Is it the great divorce recession of 2009?  Are spouses everywhere deciding that they'd rather stick out their lukewarm marriages rather than divide in half the what's-left-half of what they used to have before the economy went down the tube?  (And, did that even make sense?)

The Wall Street Journal today (July 13, 2009) heralds "What God Has Joined Together, Recession Makes Hard to Put Asunder".  Reporter Jennifer Levitz cites to spouses having to live together in the same house while getting a divorce.  One couple discussed how they work out mommy upstairs and daddy in the basement arrangements, including discussing their new dating woes, scheduling dates at different places so the spouses don't run into each other, and deciding how to handle babysitting so both spouses can go out with their new paramours on the same night.

The LA Times posits today (July 13, 2009), "Divorce and hard times: Economic woes often cause marital splits, right? Well, not so fast."   This recession is so bad that you can count divorce lawyers among those professions that have taken a hit, cites reporter Gregory Rodriguez. "Can't stand your boring husband? Thinking of calling it quits? Well, you should have mustered the nerve to leave him well before this economic crisis. Now you might not be able to afford to live without him, literally."

Ond on July 4, 2009, Newsday wondered whether the Recession Adds To the Financial Burden of Divorce, pointing to a couple who wanted to divorce and split the $1.5 million in equity in their home until their house value plummeted, making the couple question whether divorce was the best option or whether they should stay in the marriage for the (lack of) money.  Falling pension values also present a problem in providing property to divide in a divorce.

The Miami Herald questions "Is divorce rate a leading economic indicator?"  Michael Gilden says,

The depths to which our country's economy has sunk over the past year may have a correlation with this recent downward divorce trend. Many divorce lawyers had always maintained the opinion that divorce law is a recession-proof specialty. In good economic times, people tend to seek freedom from bad marriages so as to enjoy their wealth without the ties that bound them. In bad economic times, couples fought about having less money, which is also one of the leading causes of divorce.

The current economic climate, however, is like nothing anyone has seen in this country for generations. With the decline of the housing market, divorcing couples are no longer assured of a division of equity in what was most people's most valuable asset, their home. Without the proceeds from the sale of a marital residence, many people did not know where they would acquire funds to purchase a new home for themselves. The situation only became worse as the stock market plummeted and peoples 401(k)'s became 201(k)'s and as securing loans and credit became nearly impossible. At some point, there essentially became an economic disincentive to seek a divorce.

So, is it really true that people get divorced when times are good and more people get divorced when times are bad?  Or, are people waiting out the tidal wave of the recession in their lukewarm marriages, waiting for the first glimmer of hope in the economy to kick their spouse to the curb nad leave with half-of-what's-left in the dawn following the storm?

As a board certified divorce specialist for 18 years and a Dallas Divorce Lawyer, I see the 2009 divorce trends as being abnormal, but not necessarily down from prior years.  For example, usually Janaury is a big month for filing new divorces because folks usually make new year's resolutions to "finally do something".  This year, January was a lackluster month. But, for the first half of the year, my practice is only off by about 10% from last year.

I think some of the analysis of whether the economy is affecting divorce depends on the economic status of the couple.  For high income/asset couples, the issues becomes one of prioritizing where they spend their less-than-before decreased discretionary spending.  They might rather spend their income on a vacation, new car, or fine piece of jewelry.  But, if they want it badly enough, they can shift those funds to accommodate a divorce.

On the other hand, folks who live close to their means, with little in the way of a rainy-day-fund, may not have the luxury to reprioritize their finances to add an additional residence for the spouses leaving the residence and two divorce lawyers to the budget.  Those folks may be sitting still until the economy glimmers hope.

If you are the high earning spouse who can afford to take the house or stocks (or other devalued asset) and hang on to it until after the economy recovers.  Where, for the housewife or lower earner spouse who might rely on the division of assets for survival post-divorce, this is definately not the time to get divorced.

It may hold true, as Gilden states, that you can just the beginnings of recovery by watching for divorce rates to go back up, when people finally say they've had enough of this economy to wait on getting a divorce.

For more on this discussion, see my post April 30, 2009: Is Divorce A Good Idea in This Recession? 

See my other blog posts on the economy and divorce:

January 12, 2009: Increase in Child Support Modifications Seen in Dallas Divorce Courts

December 30, 2008: Divorce and Real Estate Market

Now is a good time for a Dallas Divorce

October 21, 2008: Financial Infidelity: Money and Marriage

October 8, 2008: Dallas Couples Shirking Divorce Amid Economic Woes

September 29, 2008: Bad Economy Makes Divorces Tougher

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Nine Continental pilots have been accused of hatching a divorce scam to take money out of their pension retirement plans. Continental alleges the pilots and their spouses got paper-only divorces while continuing to live together and concealing the change in their marital status from their children and friends. Once a state court approved the divorces, the pilots signed court-issued documents giving their new ex-spouses all rights to a pilots-only pension plan, worth up to $900,000 per individual participant. Then, the spouses presented the paperwork to the Continental pension plan administrator with a request for a lump-sum distribution.

Such pre-retirement payments to former spouses are allowed under the federal law that governs employer-sponsored retirement saving and investing plans that grow tax-free.

But Continental alleges that after getting the money, the couples remarried. It calls the divorces “subterfuges or sham transactions.”  Continental filed a lawsuit against the nine pilots and their spouses to recover the money lost in the scam. Continental suggested in the lawsuit that the pilots — seven men and two women — were afraid of losing major chunks of their pensions because of the financial difficulties the airline industry experienced in 2005. Around that time, Delta Air Lines, United Airlines and US Airways filed for bankruptcy protection, reneged on their pension promises and handed over the plans to a federal administrator to make good on a portion of the pension obligations.

The Pension Benefit Guaranty Corp.’s maximum guarantee is paid in periodic annuity payments instead of lump sums and is far less than a typical airline pilot pension. This year, for a 65-year-old person, the maximum is $54,000.

The Houston Chronicle reported the story this week. And, Good Morning America ran the story this morning as well.

In the GMA story, one of the female pilots accused of the scam insisted that her divorce was real and her reconciliation was real and none of the public's business.  A lawyer for one of the pilots speculated that the pilots would not have been able to hatch such a "complicated scheme" because they weren't lawyers.  (Lawyer snobbery?) 

But, the Chronicle story refers to a request by United Airllines in 1999 about some of its workers that got divorced in an alleged sham.  In that instance, 21 United maintenance workers in Indianapolis were accused of defrauding the retirement plan by following steps laid out in a pamphlet called the Retirement Liberation Handbook, which gave instructions on how to use divorce to acquire benefits prior to retirement.

This story illustrates the desperation some people fees in this difficult time.  Even though the Dallas area has fared better than other areas of the country, people get divorced for various reasons.  During my career as a Dallas Divorce Lawyer, I been aware of the occasional situation where the parties had other motives for a divorce than simply irreconcilable differences.  In each situation, the "sham" divorce backfired on the party that was trying to get away with something.  It just doesn't pay to be dishonest.

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I have been asked several times lately about whether it is a financially good idea or a bad idea to get a divorce during this recession.  Luckily, Texas and specifically the Dallas area, has not been hit as hard by the recession as other parts of the country.

Determining whether divorce is the right option for you requires weighing many different factors, including the financial impact of this decision on you and your family. It is no surprise that with the current state of our economy, the portion of the community estate most people leave their marriage with today is worth less now than it was in the very recent past. Whether it is a bad idea to get a divorce in the current economic climate depends, in part, on the types of assets that make up the community estate and the financial positions of the parties, namely, their immediate need for cash and liquid assets.

Often in a divorce, it is necessary to sell the marital residence and/or cash out an investment or retirement accounts. Now, with the current economy, these assets are worth less than they were in the past and will be again in the future. Frequently, in these tough financial times, people must sell their marital residence upon divorce because neither of them can afford it on their own. Cashing out retirement and other investment accounts upon divorce is also common due to increasing unemployment and the immediate need for cash. If selling or cashing out these assets at their current value is unavoidable, there are some definite economic disadvantages to getting a divorce right now.

 On the other hand, for those people in the financial position to hold on to these assets until the economy improves, it can give them more “bang for their buck” in the final property division. Since community assets are valued as of the date of divorce, these assets represent a smaller portion of the community estate now than they would have before the current economic downturn. The current economy enables people who can afford it the opportunity to obtain community assets in the final property division, like the marital residence or their entire 401(k) plan, at what is effectively a discount.
 

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