We have talked about the typical fee agreement when you are applying for Social Security disability benefits before. But I am often asked what is maximum someone can charge?

Social Security regulations set a cap for attorneys fees.  Originally, the fee cap was $4,000, then $5,300, and as of June 2009, the cap is $6,000.

Unless the representative is charging fees under a fee petition, the most the lawyer can charge is 6,000. Or, if you are reading this before June 2009, $5,300. 

For more information, check out all the articles dealing with attorney’s / lawyer’s fees.

A “fee petition” is a way your lawyer asks Social Security for fees for his services.

I though attorneys were paid a percentage of what I get?

Percentage-based contingency fee agreements are the most common way attorneys get paid in Slocial Security cases. However there are two ways an attorney might get paid.

Fee agreements based on a percentage of back benefits:

If you win, the attorney gets 25% of your back benefits up to a $6,000 cap (this is an increase from the $5,300 cap in effect before June 2009). The 25% or $6,000  is a standard fee agreement that Social Security will almost always approve if the case is won and results in back benefits.

Fee agreements based on a fee petition:

This is the wild west of fee agreements. Your attorney has to itemize his time and ask Social Security to be paid a certain amount. Social Security will approve whatever it sees fit, which may be more or less than $6,000.

When are fee petitions used?

Typically, fee petitions are required when the attorney works on an overpayment case. However, they are also necessary you hired two attorneys and the first attorney has not withdrawn or has not waived fees. This often comes up when a person has moved and had to hire a new attorney.

Fee petitions are also used if a person disagrees with Social Security approving the standard 25% fee agreement.  If that happens, the attorney must petition Social Security to have his or her fees approved.

Read more about attorney’s fees and fee petitions.

What if i hire a lawyer and they don’t do anything?

What if I am not happy with the lawyer?

I don’t want to be stuck with a big bill.

Fortunately, Social Security takes a lot of the worry out of hiring a lawyer.

You only pay if you win.

Most attorneys who specialize* in Social Security disability cases work on a contingency fee basis.  You only pay attorney fees if you win.  If you do not win, you do not have to pay attorney fees. The exception to this is in cases where there are no back benefits for the attorney to take fees out of, for example, overpayment cases.  In those cases, the attorney petitions Social Security at the end of the case to approve fees for the attorney’s services.  Social Security, not the attorney, decides what you have to pay.

Social Security puts a maximum cap on what you have to pay if you win.

Social Security caps the percentage an attorney can charge and the total maximum an attorney can receive for fees. An attorney can charge no more than 25% of the back benefits in the case, up to a maximum of $5,300 $6,000. You can read more about attorneys fees in Social Security cases here. This $5,300 cap may increase at some point in the future, but it probably wont be any time soon.  As of June 2009, the fee cap is increased to $6,000.

Social Security has to approve any fees an attorney charges you.

Not only does Social Security regulate the percentage and maximum fee an attorney can charge, you do not owe any fees until and unless Social Security approves the attorney’s fees. Not only does the attorney have to win your case, Social Security has to approve the amount your attorney will be paid.

The only way an attorney gets paid is by getting results for you.

Because of the regulations Social Security has in place, the only way attorneys can get paid is by winning. There is no padding hours, no extra jobs to be done, no “rust coating on the undercarriage”  The attorney only gets paid if you win.

This gives Social Security disability attorneys a LOT of incentive to work to get the best result for you!

Updated March 26, 2009.  CC photo credit: stephmcg

*Disclaimer: Colorado does not certify lawyers as “specialists” in any field.

Social Security fee agreements take one of two forms:

1. Contingency based: If you win, the attorney gets 25% of your back benefits up to a $5,300 $6,000 cap. The “25% or $5,300 $6,000″  fee agreement is a standard fee agreement that Social Security will almost always approve if the case is won and results in back benefits.
2. Fee Petition. This is the wild west of fee agreements. The representative has to itemize his or her time and ask Social Security to be paid a certain amount. Social Security will approve whatever fees it sees fit, which may be more or less than $5,300 $6,000.

2009 UPDATE: As of June 2009, the fee cap is increased to $6,000.

If an attorney asks you to sign a fee agreement that is not either for a 25% contingency, or based on a fee petition, watch out!

Why would an attorney require a fee petition based fee agreement?

One reason is that some cases, such as overpayment cases, have no back benefits.  So, the 25% fee agreement will not work (25% of 0 equals 0). In those cases, an attorney has to do a fee petition and may require a retainer which is held in a trust account until the case is over and SSA approves fees.  This is discussed in detail here.

Other times, an attorney will require a fee petition fee agreement because he or she wants to charge more than the $5,300 $6,000 cap.  If this makes you angry, hold on a moment. There are attorneys who take “lost cause” cases – cases where a person is trying to prove a disability started 10, even 20 years ago; cases which have taken more than 8 years with a the cases having multiple appeals to the Appeals Council and even District Court.  In those exceptional cases, a fee petition requesting fees in excess of the cap is reasonable. However, in most “regular” Social Security cases, the $5,300 $6,000 cap protects the client from overpaying for legal services.

Tip:  keep in mind this is only for fees (paying the representative for his/her time and experience. This does not include reimbursing the lawyer for expenses (any money the lawyer spends to develop the case, e.g. costs for medical records).  Expenses are separate from fees and you may have to pay expenses even if you do not win (and do not owe any fees).

Social Security regulates what a representative can charge.

Social Security recently loosened their rules about who can practice in front of the Social Security Administration. Until recently, only lawyers could provide representation in front of Social Security and charge a fee.  Now, non-lawyers can set up shop and provide representation on Social Security claims.

However, the cardinal rule is that a representative (lawyer or non-lawyer), cannot charge any fees unless it is approved by Social Security.

Unfortunately, this is where some non-lawyer representatives play fast and loose. They may charge you some money up front and may not refund it if they lose the case.  Some people do not ask for the money because, “well, they took my case and they tried their best.” However, under Social Security regulations, a representative cannot charge any fee (remember, this does not include the representative’s expenses in building the case) unless it is approved by the Social Security Administration.

Of course, you may have the same problem with a lawyer.  But, because of the higher level of regulation lawyers work under, they are are less likely to scam you.

I personally feel that since you are not paying any less for a non-lawyer on a Social Security case, you are generally better off getting a lawyer to represent you.

However, the touchstone of choosing a representative is deciding who is best able to help you.  Here are articles about questions to ask when choosing a representative.  Article 1.  Article 2.

Updated 03/26/09.

I have tried to give you as much information as I can about Social Security overpayment / repayment cases, because the chances of finding an attorney to work with you are not very good.

Many Social Security attorneys get paid out of the back benefits they win for the client (typically 25% up to a cap of $5,300.00 $6,000 as of June 2009).  But, when you have an overpayment case, the best outcome is you will owe $0.00.  25% of $0.00 is $0.00.

In other words, there is nothing for the attorney to take a percentage of, if they win. If you want legal help on an overpayment case you will probably have to pay some money up front. This may be between $1,000 and $3,000 depending on the complexity of the case. While my office does handle Social Security overpayment cases, they make up a small part of my Social Security practice because most people cannot afford the retainer.

Also, many attorneys do not take overpayment cases because of the extra requirement of petitioning Social Security to approve fees.  This takes extra time, beyond the time spent proving the case, just to try to get paid.

Is it worth hiring an attorney on an overpayment case?

Whether paying the retainer is worthwhile for you will depend on how much money you owe Social Security.

If you only owe $1,200, paying an attorney $1,000 probably does not make much sense.  But, if Social Security says you owe $15,000, then it may be worthwhile to pay an attorney for help.

Social Security has to approve any fees an attorney charges you.

When I say, “pay the attorney,” that is just short hand.  What I really mean is that you provide a retainer that is held in trust until the end of the case and the fee petition is ruled on by Social Security.

Under Social Security regulations, an attorney can almost never take any fee unless it is approved by Social Security. Note:  this requirement only applies to fees: paying for the attorney’s time.  Social Security does not have to approve what you owe your attorney for expenses:  money spent developing the case.

When you hire an attorney for a Social Security case, if you pay a retainer toward fees, the attorney can never take fees out of that retainer unless Social Security approves the fees.  You will know if Social Security has approved any fees because they will send you a letter, usually anywhere from 1 to 6 months after the case ends, telling what fees, if any, they have approved for the attorney.  If Social Security denies fees, they attorney must return the retainer.

What happens to the interest?

Good question!  In Colorado and many other states, there are special accounts called IOLTA (Interest on Lawyers Trust Accounts).  These are “pooling” accounts for holding multiple trusts when the amount of money is not large enough, or will not be held long enough, to warrant its own account.  Any interest earned is paid to that state’s IOLTA foundation and the money goes toward information and education about the legal system; not, I am sad to say, mountaintop retreats for retired lawyers. Ah well, a lawyer can dream, can’t he?

In Colorado, the IOLTA accounts are called COLTAF (Colorado Lawyers Trust Account Foundation) accounts.  So, you may hear COLTAF or IOLTA if you deal with a lawyer in Colorado.

Article updated May 13, 2009.