A payment plan turns an open balance into a schedule the client can keep. It works best when the firm sets the terms before anyone asks, and puts them in a short written agreement. This guide covers what to decide in advance, a law firm payment plan agreement template, and how to keep a plan from lapsing.
What goes in a law firm payment plan agreement?
The total balance, the number and amount of payments, the due date of each, how payments are made, what happens if a payment is missed, and the client’s written acceptance. Keep it to one page and tie it to the original engagement agreement by date.
Do payment plans help law firms get paid?
On the whole, yes. Clio’s 2023 Legal Trends Report found that firms offering payment plans collected 49 percent more monthly revenue per lawyer than firms that didn’t, even though their collection rates were 2 percent lower. The same report put the average installment at $300, and found that almost one in three firms (30 percent) don’t offer payment plans (Clio, 2023).
Clients ask for them too. In Clio’s 2021 Legal Trends Report, 81 percent of consumers said a firm’s ability to offer payment plans influences whether they would hire it (Clio, 2021). These figures show a link, not a cause, and a plan still needs the same follow-up as any other receivable.
Set the payment plan terms before anyone asks
Decide the plan terms before the first collection call, so staff can say yes on the spot instead of “let me check.”
- Minimum payment. A dollar floor, a share of the balance, or both.
- Maximum length. For example six or twelve payments.
- First payment. Whether one is due when the plan starts.
- Payment method. Card on file, ACH or a monthly payment link. The ABA’s GPSolo division notes that ACH transfers don’t expire the way credit cards do, and suggests weighing the burden of expiring cards on long plans (ABA, 2022).
- Missed payments. A grace period, and what happens after it.
- Interest or fees. Only if the engagement agreement and state rules allow them.
- Exceptions. Who can approve a plan outside these limits.
Plans at intake vs. plans for past-due balances
A plan set at intake is part of the fee arrangement. A plan offered on a past-due balance changes how an existing debt is repaid. If the plan changes any fee term, such as adding interest, ABA Model Rule 1.5 comment 1 says a modification should be reasonable at the time it is made and communicated to and accepted by the client (ABA).
Some firms refer clients to third-party fee financing instead. That is a different arrangement, because a lender carries the balance rather than the firm. ABA Formal Opinion 484 (2018) sets out a lawyer’s duties when referring clients to fee financing companies (ABA Journal, 2018).
Law firm payment plan agreement template
Have the billing attorney review this before first use. Fill in the brackets and delete any option that doesn’t apply.
Template: Payment plan agreement
PAYMENT PLAN AGREEMENT Client: [Client name] Firm: [Firm name] Engagement agreement dated: [date] 1. Balance. The client owes [amount] for legal services and expenses billed on these invoices: [Invoice number], [date], [amount] 2. Payments. The client will make [number] payments of [amount], due on the [day] of each month, starting [date]. The final payment of [amount] is due on [date]. 3. How to pay. Payments will be made by [card on file / ACH / the payment link sent each month]. The firm will send a receipt for each payment. 4. Early payment. The client may pay the remaining balance at any time. 5. Missed payment. If a payment is more than [number] days late, the firm will contact the client. If it is still unpaid [number] days after that, [step approved by the firm and consistent with the engagement agreement]. 6. Interest and fees. [No interest or fees will be added to this balance.] OR [Interest applies as stated in the engagement agreement.] 7. Questions. Questions about this plan or any invoice go to [name] at [phone] or [email]. 8. All other terms of the engagement agreement stay the same. Client: ____________________ Date: ________ For the firm: ______________ Date: ________
Template: Payment plan confirmation email
Subject: Your payment plan with [Firm name] Hi [First name], Thanks for talking with us today. Here is the plan we agreed on: Balance: [amount] Payments: [number] payments of [amount], on the [day] of each month First payment: [date] How to pay: [method or link] The agreement is attached. Please sign and return it, or reply “Agreed” to this email, by [date]. If a payment is going to be late, reply and let us know. We would rather adjust the plan than see it lapse. Thank you, [Name], [Firm name]
How to keep a payment plan on track
Treat each installment like an invoice with its own due date, and follow up on it the same way.
- Record every installment date in the billing system or a shared calendar.
- Send a short reminder a few days before each payment unless it is automatic.
- Follow up the day after a missed payment, by email and then by phone.
- After two missed payments, send the plan back to the billing attorney for a decision.
- When the last payment arrives, send a zero-balance confirmation.
For where payment plans fit in a wider follow-up schedule, see how to collect unpaid legal fees in 7 steps. If a client stops responding altogether, our final notice collections letter template includes a payment plan offer in the letter itself.
Payment plan checklist
A sound law firm payment plan covers these eight points.
- Terms approved in advance by the billing attorney.
- The plan refers to the engagement agreement by date.
- Every installment has a date and an amount.
- Interest or fees only if the engagement agreement and state rules allow them.
- The client accepted the plan in writing.
- Each installment is tracked like an invoice.
- Missed-payment steps are written down.
- A zero-balance confirmation goes out at the end.
ARCounsel is a done-for-you accounts receivable follow-up service for law firms that connects read-only to QuickBooks Online, LeanLaw and Clio. Its AR specialists offer payment plans only on terms the firm has approved, then follow up on each installment in the firm’s name. Clients pay the firm directly through the firm’s own payment link.
Frequently asked questions
Can a law firm charge interest on a payment plan?
It depends on the fee agreement and on state law and ethics rules. Firms that charge interest usually disclose it in the engagement letter. Check your state’s rules before adding interest to any plan.
How long should a legal fee payment plan last?
There is no standard length. Set a maximum the firm can track, such as six or twelve months, and match the installment to what the client can pay. Clio’s 2023 Legal Trends Report put the average installment at $300.
Does a payment plan need to be in writing?
A written record gives the client and the firm the same reference if a payment is missed. A signed one-page agreement, or an email reply accepting the terms, is a simple way to create it.
A note on ethics rules. Rules on fee collection vary by state, including when a firm may charge interest on a late bill or refer an account to a collection agency. Check your state’s rules of professional conduct and ethics opinions, or ask your ethics counsel, before setting a collection policy. This article is general information, not legal advice.
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