Women are often shocked to realize how much it can cost to get divorced. Suffering through the decline of your marriage and finally deciding to call it quits is enough of an emotional wringer. Once you start interviewing attorneys and figuring out how much you need to fund your divorce, the proverbial light at the end of the tunnel can seem further away than ever.
Yes, today’s financially complex divorces can be staggeringly expensive. Attorneys can cost hundreds of dollars per hour and require substantial up-front retainers. Plus, you’ll need to pay your divorce financial advisor, and any forensic accountants, vocational and valuation experts, or other professionals whose expertise you may require in pursuit of a fair settlement. And on top of all that, you’ll still need to manage your household expenses.
It’s a daunting challenge even in a relatively amicable divorce. Imagine how difficult it can be if your husband is spiteful, controlling, abusive, and/or a narcissist! It’s a well-known tactic of some well-to-do husbands to stall, delay, and needlessly complicate their divorces at every available opportunity so that the proceedings drag on for months or years. They prolong things just to drive up legal costs until their wives run out of money to continue, forcing them to take whatever deal is being offered. Without a well-funded war chest of their own, these women have no hope of a fair settlement.
What can you do if you’re facing divorce, and you don’t have money of your own set aside? Or if you have a “secret fund,” but it isn’t nearly enough? And what can you do if your husband threatens to keep you in court until you’ve spent your last dime?
You’d be far from alone in any of those situations. Even asset-rich women can be caught short on cash when it comes time to hire a professional divorce team. Usually, it’s still the husband who’s the “monied” spouse, and the wife who is financially dependent, sometimes even completely without income of her own.
But as challenging as financing divorce can be, it’s not impossible, by any stretch. In fact, you may be able to get help from an emerging business niche that is devoted solely to this topic. Several companies now provide outside funding for divorcing women who lack the immediate means to fund their legal battles. Interestingly enough, divorce represents an investment opportunity for these companies. The idea is that if you have a top-notch divorce team, you’re more likely to achieve a favorable settlement; then, the financiers will see a good return on the money they put into the effort.
For the finance companies, it’s a money-maker; for women facing divorce battles with husbands who would otherwise wield most of the leverage and power in the proceedings, it can be a game-changer.
A recent article in The New York Times gives us a glimpse of how it works. Billionaire investor Steven A. Cohen is being sued by his ex-wife Patricia, who claims he cheated her in their 1990 divorce by hiding assets which should rightfully have been divided with her then. Court documents reportedly show that to fund the lawsuit against him, Ms. Cohen has obtained litigation financing from Balance Point Divorce Funding, which is in turn backed by Asta Funding, Inc. Although the specifics of the arrangement with Ms. Cohen are not reported, the Times article indicates that Balance Point does business by taking a percentage of the settlement in return for funding litigation.
Novitas US (formerly National Divorce Capital, Inc.) also provides non-recourse advances to cover certain expenses associated with divorce proceedings. The advances can be used to pay legal fees and costs, including expert fees and personal expenses. No repayment is required unless and until a settlement is reached. Rather than being paid a specific fraction of the settlement, advances from Novitas are repaid according to an agreed schedule after a settlement or judgment is obtained.
“We provide innovative and cost effective solutions so that financial inequality does not result in inequity,” explained Nicole Noonan, Esq., CEO of Novitas US.
Whatever the repayment mechanism, one thing is certain: Outside funding can help level the playing field for many divorcing women. If Ms. Cohen didn’t have the financial ability to continue litigation, Mr. Cohen would have no real motivation to settle with her. Knowing that she can fund the suit, he can’t ignore it.
One note of caution: As of the date of this newsletter, funding options like these are available only in some states. Once the mechanisms become more well-known, I expect the divorce finance business will expand and become available (and less costly, with competition) to more women who need it.
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Reminder: While divorce financing may be a godsend, never forget that it will need to be repaid in some way. Before you enter an agreement, make sure you understand the terms of repayment and that you’re comfortable that you can meet the obligation.
Legal matters: Obtaining outside funding for your legal battle with your soon-to-be-ex husband could save you the time, difficulty and expense of protracted court proceedings. If he knows you have the resources to fight, there is less incentive for him to drag things on out of spite alone.
Hot tip: I’m not surprised the law firms I know support divorce funding companies enthusiastically. After all, from the attorney’s point of view, there’s no better way to do business than with payment assured! If you are looking for divorce financing options, ask your attorney for recommendations. They may have several contacts for you to investigate.
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Jeffrey A. Landers, CDFA™, is the author of the Amazon best-selling books, Divorce: Think Financially, Not Emotionally® –What Women Need To Know About Securing Their Financial Future Before, During, And After Divorce, Volumes I and II and Think Financially, Not Emotionally® −A Woman’s Guide To Financial Security After Divorce (to be published Fall 2015).
He is also the founder of Bedrock Divorce Advisors, LLC, a divorce financial advisory firm that works exclusively with women throughout the United States, and the creator of ThinkFinancially.com, a website created to educate, empower, and support women before, during, and after divorce.
Landers writes “Divorce Dollars and Sense,” a weekly blog for Forbes.com about the financial aspects of divorce for women, and he contributes articles regularly to The Huffington Post, DailyWorth, More.com, Lawyers.com, and many other publications.
