What If Your Clients Can't Pay?

By Wells H. Anderson

A disaster strikes your area, leaving your home and office untouched. Your first concerns are for your family, your friends, and your community. Later, you return to your office and turn your attention to your clients. What steps can you take in this situation—and ahead of time—to serve your clients and protect your practice?

Dealing with Clients Affected by a Disaster

• After a disaster, get in touch with each of your clients to show your concern for them and to find out how their legal affairs have been affected.
• Seek out your clients by telephone at home or even by personal visits if they are hard to reach. You need to protect your clients’ legal rights, so talk to them.
• Do not wait for your clients to be late in paying your bills. Raise the subject a couple of weeks after your initial contact.
• Consider offering alternatives to clients in financial difficulty: partial payments over time, waiver of any interest, discounts, or additional services at no charge.
• Difficulties with collections and defending counter-claims for malpractice or unreasonable fees can make collection actions against your clients a waste of time or worse.
• If a client files bankruptcy, stop mailing bills and pursuing collection. Consult a bankruptcy attorney to protect your rights.
• To get paid for contingent fee cases of clients who file bankruptcy, get court approval to continue your representation.

Preventative Steps to Protect Your Income

• Start setting aside money each month to build a cash reserve equal to your living expenses and practice expenses for six months as protection against loss of income.
• When practical, ask for a significant retainer up-front and a clause requiring that the retainer be replenished on a monthly basis.
• Accept credit card payments from clients who could not otherwise afford retainers.
• Send regular, detailed bills to minimize unbilled and unpaid fees.
• Institute a follow-up system for regularly communicating with your clients. They are more likely to pay you ahead of others if they appreciate what you are doing for them and the important results you obtain on their behalf—a good practice in any event.

Wells H. Anderson is president of Active Practice LLC. He can be reached at info@activepractice.com.

Copyright 2006