The fee arrangement for social security disability claimants is simple: 25% of retroactive benefits or $6000, whichever is less. Most disability claimants are in extreme financial distress and needed their disability benefits approved yesterday. On its face is seems the interests of the disability applicant and their disability attorney are not aligned because the disability attorney’s potential fee increases with every month that passes.
The average social security disability check is around $1000 a month. So social security disability attorneys make on average $250 more for each month of delay in awarding benefits. On the surface this seems like a strong incentive for the social security disability attorney to delay their client’s approval.
Putting aside that such behavior would be unethical, does a social security disability attorney really benefit from the horrendously long waits for a disability case approval? I hope to convince you that the lengthly delays hurt claimants and attorneys alike. Here are the real issues for the social security disability attorney.
- Cash Flow. Maintaining positive cash flow is perhaps the most challenging problem for small/medium size business. Overhead such as rent, salaries and utilities must be paid every month, without regard to how much income is coming in the door. When bills need to be paid, the social security disability lawyer would much rather receive her fee now even if that fee would have increased with the passage of time.
- Time Value of Money. This concept is defined as follows by investopedia” as “[t]he idea that money available at the present time is worth more than the same amount in the future due to its potential earning capacity.” Perhaps a better way to understand this concept is the well-known adage that “a bird in the hand is worth more than one in the bush”.
- Delayed cases make for unhappy clients. Every day I get at least one call from a social security disability applicant who is mad at her lawyer because “he’s not doing anything'” or “the case is dragging on”. Clients often fire their disability attorney primarily because the claim is not resolved. On the other hand a happy client who just won his benefits is likely to tell others his good experience with the attorney, increasing the attorneys case load.
- Case Load “Churn”. Stay with me here because this is the main reason that the notion social security disability attorneys benefit from the long disability approval wait is proposterous. I am sure all would agree that a legal office has a case load capacity that can be worked at any one time. So when a claim is closed, there is room for a new case.
Let’s consider an example. Let’s say Attorney Smith cares only about the money and doesn’t give a fig about his client’s suffering in waiting for disability. Client A has a winning case in which the client would receive monthly benefits of $1000. Back benefits have built up, meaning Atttorney Smith would get a $2000 fee for this month. But if he waits until next month his fee would be $2250. So Attorney Smith considers: should I delay winning Client A’s case for a month? Here’s why delay is a very bad deal for Attorney Smith’s bottom line.
Most social security disability claimants do not file a claim for disability immediately after ceasing to work because they hope to get better and return to work. And most social security disability claimants do not hire an attorney until they have gotten at least one denial. Therefore a new disability client “comes in the door” for an attorney with a fee potential even if the case was paid immediately. At the time a social security disability attorney signs up a new client with a pending disability claim a typical fee potential would be around $1000. Lets call this person Client B.
So let’s compare the outcome for attorney Smith to see if he really is better off in delaying client cases:
|Attorney Smith Delays Case|
|Actual Fee||Potential Fee|
|0||$2250 (Client A)|
|Attorney Smith does the Right Thing (Completes Client A case and retains Client B)|
|Actual Fee||Potential Fee|
|$2000 (from Client A)||$1000 (Client B)|