Recovering Attorney’s Fees in Kentucky Collection Cases
One of the most common questions creditors ask is whether they can recover their attorney’s fees as part of a collection action. In Kentucky, the answer depends on the legal basis for the claim and the terms of the underlying agreement. Getting this right can significantly affect whether pursuing a collection case makes economic sense.
The American Rule: Each Side Pays Its Own
Kentucky follows the American Rule, which means that each party to a lawsuit generally pays its own attorney’s fees regardless of who wins. Unlike some countries where the losing party pays the winner’s legal costs, Kentucky does not automatically award attorney’s fees to the prevailing party in most civil actions. This default rule applies unless a specific statute or contractual provision provides otherwise.
Contractual Attorney’s Fees Provisions
The most reliable way to recover attorney’s fees in a Kentucky collection case is through a contractual provision. Many well-drafted contracts, promissory notes, and credit agreements include a clause requiring the debtor to pay the creditor’s reasonable attorney’s fees and collection costs in the event of default. Kentucky courts generally enforce these provisions.
The key is that the provision must be clear and unambiguous. A clause stating that “in the event of default, the borrower shall pay all costs of collection, including reasonable attorney’s fees” is typically enforceable. Courts will review the fees claimed to ensure they are reasonable — extravagant or inflated fee requests may be reduced by the court.
If you are a business extending credit, including an attorney’s fees provision in your contracts, invoices, and credit applications is one of the simplest and most effective steps you can take to protect your collection rights.
Statutory Attorney’s Fees
Certain Kentucky statutes authorize the recovery of attorney’s fees in specific contexts relevant to collections.
KRS 371.990: This statute imposes penalties for checks returned for insufficient funds (“bad checks”), including the right to recover reasonable attorney’s fees. If a debtor pays with a check that bounces, the creditor may recover the face amount of the check plus additional damages and fees.
KRS 383.580: In landlord-tenant disputes involving wrongful withholding of security deposits, the prevailing tenant may recover reasonable attorney’s fees. While this is more of a tenant remedy, landlords pursuing unpaid rent may find attorney’s fees available under their lease terms.
KRS 367.220: Kentucky’s Consumer Protection Act provides for attorney’s fees to prevailing plaintiffs in actions involving unfair or deceptive business practices. While typically used by consumers, businesses can also invoke this statute in some commercial contexts.
Calculating Reasonable Fees
When attorney’s fees are available — whether by contract or statute — the amount awarded must be reasonable. Kentucky courts evaluate reasonableness by considering factors such as the amount and complexity of the claim, the time and labor required, the customary fee for similar work in the community, the results obtained, and the experience and ability of the attorneys involved. Courts may require the attorney to submit detailed billing records to support the fee request.
Fee-Shifting in Small Claims Court
In Kentucky small claims court (claims of $2,500 or less), the prevailing party may recover court costs, but attorney’s fees are generally not awarded unless authorized by contract or statute. Since many small claims litigants represent themselves, attorney’s fees are less frequently at issue. However, if a contract authorizes fees and the creditor is represented by counsel, the court may award reasonable fees even in small claims proceedings.
Practical Implications for Creditors
The availability of attorney’s fees affects the economics of every collection decision. If you can recover fees, pursuing smaller debts becomes more viable because the legal costs will be shifted to the debtor. If you cannot recover fees, you need to weigh the cost of litigation against the amount you are likely to collect. For recurring credit relationships — such as vendor agreements, service contracts, and lease arrangements — including an attorney’s fees provision in your standard terms is essential.
Draft Your Contracts Carefully
An attorney’s fees clause must be drafted properly to be enforceable. It should specify that fees are recoverable in the event of default or breach, that the fees must be reasonable, and that they include costs of collection whether or not suit is filed. Overly broad or punitive provisions may be challenged as unconscionable.
If you are a creditor seeking to collect a debt and want to know whether attorney’s fees are recoverable in your case, Buckles Law Office can review your claim and advise you. Call (859) 225-9540.
