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Divorce financing: an emerging industry

In a high asset divorce, one spouse often has more financial resources at the beginning of the process, which is a significant advantage. The spouse with fewer resources is sometimes forced to accept less in a divorce settlement than they are entitled to, because he or she just can't afford a lengthy court dispute. Wealthier spouses know this, and are in a position to prolong a dispute just to force the other side to run up legal fees they can't afford.

Now a new industry has sprung up to give some financial leverage to the poorer spouse. A number of financial firms now specialize in divorce financing. The firms typically operate by making loans to litigants, usually at interest rates that compare to those of credit cards. The firms do a lot of research before getting involved in a case, to determine the chances of success and the potential size of the settlement.

Some firms take a bigger role and actually invest in the case; unlike the firms that loan money, these ones don't necessarily get their money back if things don't turn out as hoped. Presumably, however, they take a bigger cut if the settlement is favorable.

Divorce doesn't have to be expensive, but it often is. In addition to attorney's fees, in a high asset divorce expert witness fees, for forensic accountants or child psychologists, can be exorbitant. Financing makes sense if the poorer spouse stands to get a multimillion dollar settlement. But it should be undertaken carefully and only after consultation with one's attorney. In the case of loans, which must be repaid win or lose, this is especially important.

Source: NBCnews.com, "For the poorer spouse, financing for the divorce battle," Geoff Williams and Beth Pinsker, April 16, 2013

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