-By Nedda Ghandi, Esq.
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Picture this: You are retained as plaintiff’s counsel in a personal injury action on a contingent fee basis. Through your expert handling of the matter, you procure a favorable settlement or judgment for your client. Your client is pleased with the result, and you are ready to collect your fee. But will you get paid if your client files a bankruptcy petition?
If your client’s finances or even medical bills from their injury are such that bankruptcy is inevitable, a properly perfected charging lien may be crucial to protect your right to payment. See In re Nicholson, 57 B.R. 672, 675 (D. Nev. 1986) (holding a bankruptcy trustee may avoid an unperfected charging lien). Indeed, my firm has been involved in several bankruptcy cases in which the debtor’s personal injury counsel was unable to recover his or her fee as an unsecured creditor. If those firms had taken advantage of the statutory lien afforded to Nevada attorneys, however, they would have been in a much better position to recover their fees, as claims secured by statutory liens take priority over many other claims that may be made against the debtor’s assets, such as most medical bills and credit card debt. See generally 11 U.S.C. § 507 (priorities); 11 U.S.C. § 724 (treatment of certain liens). Thus, an attorney’s contingent fee is much more likely to be paid when secured by a perfected charging lien.
Charging Liens & How To Perfect Them
To perfect a charging lien, you must serve both the client and the defendant(s) personally or by certified mail, return receipt requested, with written notice stating that you are claiming a lien and the amount claimed. See NRS 18.015(3)1. Where the amount of the attorney’s agreed-upon fee is a percentage of the proceeds, the notice must disclose the attorney’s contingency percentage and claim court costs and out-of-pocket costs advanced by the attorney in an amount to be determined. See Golightly & Vannah, 373 P.3d at 106, 132 Nev. at ___. Importantly, proper notice must be given before any funds are received. Id. If this procedure is timely completed, your charging lien will be perfected and attach to any money or property recovered on account of your client’s claims—and, in the event of a bankruptcy, you will likely be at or near the front of the line to be paid as a secured creditor. Should you fail to serve the appropriate notice to all necessary parties before a settlement is carried out, the lien will not attach and you will be relegated to unsecured creditor status in the event of a bankruptcy.
Don’t let your hard work go to waste due to your client’s financial circumstances. Follow the simple procedure for perfecting a charging lien and protect your hard work and corresponding fee!
1. In relevant part, NRS 18.015(1)(a) provides that an attorney “shall have a lien . . . [u]pon any claim, demand or case of action, including any claim for unliquidated damages, which has been placed in the attorney’s hands by a client for suit or collection, or upon which a suit or other action has been instituted.” This “charging lien” secures the amount of any fee agreed upon by the attorney and the client, or, absent an agreement, a reasonable fee for the attorney’s services, and attaches to any judgment entered and any money or property recovered on account of the suit or other action. See NRS 18.015(2)-(3). However, the charging lien does not spring into existence the moment judgment is entered or settlement papers are signed. Rather, in order for the lien to attach and provide the intended security, the attorney must strictly comply with the procedure for perfecting the lien before recovery is obtained. See NRS 18.015(4); Golightly & Vannah, PLLC v. TJ Allen, LLC, 373 P.3d 103, 132 Nev. Adv. Op. 41 (2016).
Nedda Ghandi, Esq., is the founding partner of Ghandi Deeter Blackham Law Offices. A Nevada native, Ghandi is a graduate of the University of Nevada, Las Vegas William S. Boyd School of Law and has practiced law in Las Vegas for 9 years. Ghandi has written numerous articles for publications concerning interesting developments in the law, and has been selected as a member of Nevada’s Legal Elite and as a Super Lawyer every year since 2013. Ghandi Deeter Blackham specializes in family law, bankruptcy, guardianship, and probate. Consultations may be scheduled by calling 702.878.1115 or visiting www.ghandilaw.com.