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Divorce Lending in the United States

 Posted on March 10, 2016 in Divorce

divorce lending, Naperville divorce attorneyHigh net-worth divorces can become complicated for a number of reasons. Take, for example, a case where two spouses marry but make different lifestyle choices. One spouse pursues a career and amasses wealth while the other focuses on raising children and maintaining the household. The money-earning spouse asks for a divorce, and suddenly, the other spouse has no access to funding to finance her side of the divorce. Should the ‘non-monied’ spouse be left at a disadvantage? Now, financiers hoping to profit off of the high divorce rate in the United States have spearheaded a new industry known as “divorce lending,” which has risen in popularity, especially in high net-worth cases.

How Does Divorce Lending Work?

Major divorce lenders have spread across the United States, each with a varying method of supplying their clients with funds to finance their divorce and living expenses. BBL Churchill, one of the major players in the divorce funding industry, offers its clients loans and charges interest on them. Balance Point Funding, out of Los Angeles, funds their clients and then takes a cut of any marital assets that are won. Those in the divorce funding industry says the goal is to help clients fight for themselves and ensure that they do not settle too early.

Aside from divorce funding, the non-monied spouse can also petition the court to have their spouse assist with their legal fees, but divorce funders say those requests are not always granted. As the bills start piling up, many non-monied spouses worry about how they will ever be able to pay them off. This can leave the “non-monied” spouse feeling forced to settle early without fighting for a fairer settlement. Lenders also say their loans can help their clients in many other ways throughout the divorce process, such as hiring private investigators or forensic accountants.

A Conflict of Interest?

Many have questioned the ethics of divorce lending. For example, some have wondered how involved a lender should be within their clients divorce process. Should financiers be involved in divorce negotiations? One attorney says their client considered divorce funding but decided against it after learning that the firm wanted decision-making power. Others are saying that a conflict of interests could arise if a divorce attorney were to bring a client to a divorce lender or vice-versa. Attorneys are concerned that by working with divorce lenders, they may be encouraging their clients to take on debt. Others are worried that divorce lenders may attempt to breach attorney-client privilege when looking for information on potential customers. Many divorce lenders are particular about their clientele. Balance Point Funding, for example, will only take on a case if there is at least $5 million in the marital estate.

Another concern is that divorce lenders could potentially encourage their clients to take on loans with high interest rates, and lead their client to expect a higher divorce settlement than they will truly receive. Say, for example, a person spends an extra $20,000 on their divorce. They may add $20,000 plus to their settlement, but they most likely will not receive millions of dollars. Final settlements tend not to be too far off from earlier offers.

Aside from financial concerns, some are worried that divorce lending could encourage prolonged divorce proceedings. One leader from the American Association of Matrimonial Lawyers has questioned the industry. “Some people say if you have litigation assistance, it encourages needless litigation. There is some wisdom to that. Sometimes people with wealth just fight for the sake of fighting.”

Affordable and Efficient

At Pesce Law Group, P.C., our goal is to ensure affordable and efficient service to our clients. Our team has years of combined experience handling a variety of divorce-related cases, and we utilize cost-effective strategies to ensure beneficial outcomes for our clients. Divorce can be stressful and challenging, but quality legal assistance does not need to be financially or emotionally draining. Call 630-352-2240 to speak to a qualified Naperville divorce attorney today.


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