Some creditors believe that they can only collect contractual attorney's fees if their attorney files suit against the debtor and obtains judgment. That is not the case. Creditors do not have to file suit or obtain judgment, but they do have to hire an attorney and give the required notices. They may collect attorney's fees when they follow the terms of their contract for default, breach, or cure and then comply with O.C.G.A § 13-1-11. The statute provides in part that "[o]bligations to pay attorney's fees upon any note or other evidence of indebtedness ....shall be valid and enforceable and collectable as a part of such debt if such note or other evidence of indebtedness is collected by or through an attorney after maturity." The statute requires that the creditor give written notice to the debtor that she may avoid payment of attorney's fees if she pays the debt within 10 days of receipt of the written notice. After the expiration of the 10-day notice period, the creditor is entitled to payment of its contractual attorney's fees as part of the indebtedness.
Georgia's attorney fee statute, requiring 10 days' written notice before enforcing contractual attorney's fees, gives debtors the opportunity to avoid the contractual obligation to pay the creditor's attorney's fees by paying the balance of the debt without attorney's fees within the 10 day time period from their receipt of notice. The Georgia Supreme Court described this notice and time as the debtor's "last chance to pay the balance and avoid litigation" in Austin v. Bank of America, N.A., 293 Ga. 42, 52, 743 S.E. 2d 399 (2013). Once the proper notices are given, and 10 days have passed without payment, the creditor may collect attorney's fees under the contract and Georgia law.
In days long past, the Georgia legislature enacted a requirement that all contract attorney's fee provisions were void and unenforceable unless the debtor was unsuccessful in court litigation. That changed in 1900. Since then, Georgia has had some version of the statute requiring 10 days' notice, which is more favorable to creditors. But it also gives the debtor the benefit to pay the debt and not have to pay attorney's fees to the creditor.
Attorney's fees are calculated in accordance with the applicable formula set forth in O.C.G.A § 13-1-11. Where the note or other evidence of indebtedness provides for attorney's fees in some specific percent of the principal and interest owing thereon, such provision and obligation shall be valid and enforceable up to but not in excess of 15 percent. When the note or other evidence of indebtedness provides for payment of "reasonable fees" without stating a percentage, the statute provides for 15% of the first $500.00 of principal and interest, then 10% of the remaining amount due. Under an amendment in 2012, when the amount of attorney's fees due is more than $20,000.00, the debtor may request a hearing to have the court decide the reasonableness of the fees.
When proper written notice is given, and the required time passes, the contract provisions for attorney's fees are enforceable, whether the creditor's attorney files suit or not.
O.C.G.A § 13-1-11 applies to all promissory notes and other evidence of indebtedness. The statute also applies to leases and other debt obligations. Creditor rights attorneys at Stites & Harbison PLLC can review and advise you on your contractual rights to attorney's fees, prepare appropriate notices and letters under the contracts, negotiate loan workouts incorporating attorney's fee payments, foreclose liens on collateral, and file suit when that becomes necessary.
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