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When Divorce Gets Expensive, Some Turn to Divorce Financing

Often, when people think about divorce or any legal process, they think they are in for a big expense. Unfortunately, the cost of a lawyer sometimes deters people who deserve their days in court from going forward with a contested divorce case. According to The New York Times, some entrepreneurs have caught on to that problem and are trying to help the less financially fortunate fight for their rights.

For example, if a stay-at-home mom is in the midst of divorce and knows that she deserves a substantial amount out of the couple's property division agreement, plus financial support from her ex, divorce lenders can help make that financial justice happen. One founder of a divorce investment business says that much of her company's business comes from mothers who have less liquid assets to devote to a divorce attorney compared to their husbands.

By seeking the support of a lender, the "underdog" mothers can get the money they need to continue their legal fights for fair endings to their marriages. They can hire experienced family law attorneys and spend the necessary time it takes to protect their and their children's best interests.

Investing in divorce, of course, is a business with which lenders not only hope to help desperate clients seek justice, but they also aim to make money. To acquire the divorce loan, therefore, potential loan recipients would have to prove that they have strong cases and can win favorable (high-paying) judgments from the court. Upon a win, the lenders would get back their loans plus a reportedly modest percentage as profit.

The New York Times does not share what happens if a loan recipient doesn't win their case, but that hypothetical, along with the fact that lenders would profit from a win, leaves some critics skeptical of the business. Would those who lose a case need to pay interest on the loan and wind up worse off financially than they would have without seeking financing?

A founder of a divorce investment company claims that lenders don't give their input regarding the legal process. They trust that a loan is acquired so a client can hire an effective divorce lawyer to deliver a win for everyone involved. But some critics still fear and vehemently warn consumers that since lenders have a stake in the divorce case, they will encourage loan recipients to pursue a win no matter the ethics involved.

Source

The New York Times: "Taking Sides in Divorce, Chasing Profit," Binyamin Appelbaum, 4 Dec. 2010

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