Divorce Funding

The stories of financially dependent spouses or partners (most often women) receiving far less than their due in divorce settlements are legion. Many, until recently, had been conditioned to expect short shrift, because they were without the funds to retain top lawyers and forensic accountants and support themselves and their families at the same time.

The Legislative 'Band-Aid'

Recognizing the inequity inherent in this situaiton, courts in many states wrestled with tactics to level the playing field, albeit with mixed results. In 2010, New York State enacted a legislation designed to ensure that neither spouse would be able to use the other's financial situation to their advantage.

However, even the best legislative and judicial intentions (including payment of attorney fees) often failed the test of equitability beyond an interim counsel fee award. To compensate, less-moneyed spouses have sometimes been forced to seek funding from friends and family; sell their stocks, bonds and jewelry; prematurely empty retirement accounts; and max out their credit cards. And when these funds run out, they are forced to settle.

An Innovative Option

However, there is another alternative ' a financial methodology called Divorce Funding. The concept of Divorce Funding was imported from Australia two years ago. It is a specialized lending product for divorcing parties, their attorneys and accountants. The system, essentially a version of “accounts receivables financing,” permits a lender to make immediate loans to a divorcing client, based on the client's expected settlement. Unlike banks and finance companies, which extend credit and make loans based on an individual's ability to make immediate monthly repayments, Divorce Funding entities base the loans offered on the anticipated settlement from the divorce proceedings. Clients applying for Divorce Funding are not required to demonstrate an ability to make monthly payments, as the loan is repaid in full at the time of settlement.

A client with Divorce Funding has the resources to pay living expenses and to retain appropriate legal and financial representation. A client who is able to pay school tuition, medical bills and the phone bill is a client who can commit to the process required to deliver optimal results in child custody hearings and division of assets negotiations, as well as in litigation and other aspects of the divorce process. And beyond paying legal and accounting fees, funds may also be used to hire expert witnesses, financial experts, appraisers, etc.

According to Madelaine Marzano Lesnvich, past president of the American Academy of Matrimonial Lawyers, divorce finance is “a game-changer for the non-moneyed spouse. It establishes a win/win scenario for clients and their attorneys. Clients have no need to ask attorneys to carry them financially through a divorce. And attorneys are paid promptly through the case.”

Fighting Back

Let us look at an illustration of how Divorce Funding can help a non-monied spouse.

When a long-married television newscaster retired from broadcasting to raise her three young children, she and her husband agreed they would live on his income alone. The transition went smoothly and the couple moved into a $3 million condo, sent their children to private school, and so on. When the children entered high school and required less of her attention, her husband suggested she fill up her time by taking on new hobbies, and she became an avid photographer. When the couple's youngest child left for college, the wife started a child photography business. While she was out of town taking a digital photography course, her husband moved out, emptied the house and their bank accounts, and served her with divorce papers upon her return.

With no credit of her own and no access to the couple's joint savings, the wife was frantic. Juggling living expenses and wading through the divorce process, she contacted an attorney friend who explained the concept of Divorce Funding and referred her to a local lender.

The firm reviewed her situation, along with her attorney, and immediately approved a $250,000 loan toward her legal fees and extended another $100,000 loan to cover her living expenses. She now had the funding necessary to live and to retain the attorney and forensic accountant of her choice.

Smoother Cash Flow

Family law and matrimonial practices historically carry sizeable accounts receivables. Their general practice colleagues may resent carrying these practices' sizable accounts receivable and the certainty of “floating” the practice ' a cash flow situation that can be daunting. But in addition to the benefits of funding for divorcing parties and their individual attorneys, Divorce Funding offers significant cash flow advantage to matrimonial and family practices at law firms of all sizes by ensuring law firms no longer need to function as banks carrying high client receivables as a matter proceeds through the system.

Conclusion

The value of Divorce Funding for anyone facing the daunting prospect of enormous legal fees is clear; it ensures that clients can afford to litigate if necessary. This permits attorneys to pursue appropriate outcomes in cases that might otherwise result in unfair settlements ' particularly in complex “big money” cases where marital assets may be hidden or frozen. And for a single-practice firm focusing on matrimonial law, Divorce Funding provides professionals with an opportunity to represent clients whose assets are illiquid or frozen, but without the cash-flow pressure to force a settlement.

It's a win-win scenario for all concerned.

Nicole Noonan is an attorney and the client service manager for the BBL Churchill Group, a divorce lending specialist. She may be reached at 212-797-0212.

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Money changes everything.

From a client's perspective, having it can mean the difference between retaining appropriate representation and paying the bills during the separation, divorce and custody process. For an attorney, a client who is not frantic about paying an electric bill is a client with the capacity to let counsel negotiate a truly fair and equitable settlement or asset distribution, rather than simply accepting the first offer.

It takes time (and money) to ferret out cleverly hidden assets or clear a moneyed spouse's lengthy prevarication about real income, and there are attorneys skittish about representing those without sure access to the resources to pay legal fees.

The stories of financially dependent spouses or partners (most often women) receiving far less than their due in divorce settlements are legion. Many, until recently, had been conditioned to expect short shrift, because they were without the funds to retain top lawyers and forensic accountants and support themselves and their families at the same time.

The Legislative 'Band-Aid'

Recognizing the inequity inherent in this situaiton, courts in many states wrestled with tactics to level the playing field, albeit with mixed results. In 2010, New York State enacted a legislation designed to ensure that neither spouse would be able to use the other's financial situation to their advantage.

However, even the best legislative and judicial intentions (including payment of attorney fees) often failed the test of equitability beyond an interim counsel fee award. To compensate, less-moneyed spouses have sometimes been forced to seek funding from friends and family; sell their stocks, bonds and jewelry; prematurely empty retirement accounts; and max out their credit cards. And when these funds run out, they are forced to settle.

An Innovative Option

However, there is another alternative ' a financial methodology called Divorce Funding. The concept of Divorce Funding was imported from Australia two years ago. It is a specialized lending product for divorcing parties, their attorneys and accountants. The system, essentially a version of “accounts receivables financing,” permits a lender to make immediate loans to a divorcing client, based on the client's expected settlement. Unlike banks and finance companies, which extend credit and make loans based on an individual's ability to make immediate monthly repayments, Divorce Funding entities base the loans offered on the anticipated settlement from the divorce proceedings. Clients applying for Divorce Funding are not required to demonstrate an ability to make monthly payments, as the loan is repaid in full at the time of settlement.

A client with Divorce Funding has the resources to pay living expenses and to retain appropriate legal and financial representation. A client who is able to pay school tuition, medical bills and the phone bill is a client who can commit to the process required to deliver optimal results in child custody hearings and division of assets negotiations, as well as in litigation and other aspects of the divorce process. And beyond paying legal and accounting fees, funds may also be used to hire expert witnesses, financial experts, appraisers, etc.

According to Madelaine Marzano Lesnvich, past president of the American Academy of Matrimonial Lawyers, divorce finance is “a game-changer for the non-moneyed spouse. It establishes a win/win scenario for clients and their attorneys. Clients have no need to ask attorneys to carry them financially through a divorce. And attorneys are paid promptly through the case.”

Fighting Back

Let us look at an illustration of how Divorce Funding can help a non-monied spouse.

When a long-married television newscaster retired from broadcasting to raise her three young children, she and her husband agreed they would live on his income alone. The transition went smoothly and the couple moved into a $3 million condo, sent their children to private school, and so on. When the children entered high school and required less of her attention, her husband suggested she fill up her time by taking on new hobbies, and she became an avid photographer. When the couple's youngest child left for college, the wife started a child photography business. While she was out of town taking a digital photography course, her husband moved out, emptied the house and their bank accounts, and served her with divorce papers upon her return.

With no credit of her own and no access to the couple's joint savings, the wife was frantic. Juggling living expenses and wading through the divorce process, she contacted an attorney friend who explained the concept of Divorce Funding and referred her to a local lender.

The firm reviewed her situation, along with her attorney, and immediately approved a $250,000 loan toward her legal fees and extended another $100,000 loan to cover her living expenses. She now had the funding necessary to live and to retain the attorney and forensic accountant of her choice.

Smoother Cash Flow

Family law and matrimonial practices historically carry sizeable accounts receivables. Their general practice colleagues may resent carrying these practices' sizable accounts receivable and the certainty of “floating” the practice ' a cash flow situation that can be daunting. But in addition to the benefits of funding for divorcing parties and their individual attorneys, Divorce Funding offers significant cash flow advantage to matrimonial and family practices at law firms of all sizes by ensuring law firms no longer need to function as banks carrying high client receivables as a matter proceeds through the system.

Conclusion

The value of Divorce Funding for anyone facing the daunting prospect of enormous legal fees is clear; it ensures that clients can afford to litigate if necessary. This permits attorneys to pursue appropriate outcomes in cases that might otherwise result in unfair settlements ' particularly in complex “big money” cases where marital assets may be hidden or frozen. And for a single-practice firm focusing on matrimonial law, Divorce Funding provides professionals with an opportunity to represent clients whose assets are illiquid or frozen, but without the cash-flow pressure to force a settlement.

It's a win-win scenario for all concerned.

Nicole Noonan is an attorney and the client service manager for the BBL Churchill Group, a divorce lending specialist. She may be reached at 212-797-0212.

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