Divorce is expensive. While there is of course an emotional toll, there is also a heavy financial toll of which many clients are not prepared. This is a problem not only for clients, but for the attorneys and experts representing them. Even under the best circumstance divorce is difficult, not to mention expensive. According to a recent article on Forbes.com, the average cost of a contested divorce ranges from $15,000 to $30,000, with some divorces costing into the millions. Alternative dispute resolutions such as mediation also have substantial fees. Other costs that may be incurred include parent education classes, counseling sessions, psychiatric evaluations or forensic accounting. The best advice for couples preparing for a divorce: do not underestimate the expense.
Divorce attorneys are often asked to carry the cost of the divorce for a client. Alternatively, they turn away clients without the resources to fund their litigation. Firms are often left acting as a bank for their clients even though they have their own overhead to pay. Of course this is bad business and attorneys want to be paid. It is important for attorneys to know about options they have to present to their clients.
Divorce funding is one such option. Divorce funding assists divorce attorneys in securing the best possible outcome for their clients by ensuring the financial constraints do not compromise the outcome of the case. Resolving family law disputes can be expensive and the costs sometimes unpredictable. In addition, the inability to regularly meet legal bills can causes strain on the attorney/client relationship. Never again will the attorney have to wait for payment. Divorce funding allows receivables paid on time every time. Additionally, it improves cash flow to the firm, removes credit risk of the client from the firm and allows for the repayment of money owed to the firm by the current client.
How do people typically afford a divorce?
In a perfect world both spouses have money set aside in case of a divorce, though in reality people save for weddings, not divorces. While it would be wonderful if both spouses got along and could agree on how assets should be divided, unfortunately this is not always the case.
As an alternative to saving, the moneyed spouse could be ordered by the court to pay both sides’ legal fees and expert cost, but even getting through to motion practices can be expensive and time consuming. Not to mention, there are no guarantees the client will be awarded fees. Further, many judges defer to the end of the trial before awarding fees. Friends or family might serve as a funding option for some but not as an option for everyone. Consequently, funds from friends or family could be seen as a gift, not as something that needs to be repaid. Therefore it may cut into the amount of equity distributed to the client.
Putting the cost of a divorce on a credit card is another option, but for many the credit card limit would not meet the cost of the legal fees. Additionally, payments have to be made which may not be possible for some clients. Low credit scores may prevent a spouse from being eligible for a credit card after the divorce.
Besides retirement and pension accounts, a family home is probably the most valuable asset to be divided in a divorce. Clients sometimes look to a bank to refinance the marital home to help pay for their divorce. A judge may order litigants to pull equity from a house in order to pay for interim support and legal fees until a divorce is final. Selling a home can sometimes affect the emotional stability of the children in a family, which then causes a spectrum of problems in custody battles.
Home equity loans can take many months to get approval, and the loss of a home can threaten custody battles. On the other hand, lenders may not approve clients during a divorce and causing a variety of roadblocks to a divorce. Sometimes, couples going through a divorce don’t know where to turn.
Leveling the Legal Playing Field with Divorce Funding
Unlike banks or finance companies, divorce funding companies, such as New Chapter Capital, will assess eligibility based on the expected settlement from a client’s divorce proceeds not current assets, income or credit score. Funding is available for legal fees, expert costs and reasonable living expenses. Divorce funding first became popular in the United Kingdom and Australia. It was brought over to the United States in 2011. Having been the pioneer in the industry since it started in the United States, we at New Chapter Capital witnessed the fundamental changes divorce financing has made in helping people through divorces. The funds we provide give the client the ability to hire qualified attorneys and experts to assist in achieving a fair settlement and perhaps locate hidden assets. Unlike credit cards there are no repayments due until settlement. No mortgages are taken over the client’s property.
Divorce funding is a valuable tool not just for clients but also for experts. It has become an integral practice management tool for an increasingly large number of divorce lawyers in the United States. Should an individual going through a divorce lack the funds to hire proper divorce assistance, divorce funding could be an option. Divorce funding gives qualified spouses’ lines of credit that help them pay legal costs, expert fees, and living expenses while they work toward a fair divorce settlement. It is an increasingly popular product that can help divorcing spouses find hidden assets and ensure a more secure financial future for themselves and their children.