The crash of the housing boom has been felt by everyone– trust me, I see it every day.  People used to just sell their homes, split the proceeds and go their separate ways with a nice chunk of change.  Not so much the last couple of years as people have seen their home values take a dive, leaving many with homes under water.  In a divorce, this issue is further exacerbated by the fact that few still have Lines of Credit or Home Equity Lines that they can borrow against to help pay their legal fees.  So what are people that need legal assistance supposed to do in order to pay for desperately needed legal services?  They need to borrow cash– at least $20,000 on the low end for a litigated case, and as much as $400,000 depending on the complexity of the issues and assets at stake.

Today, on Good Morning America we will be talking about a growing trend in the US– obtaining a loan through a divorce finance company to assist not just with legal fees, but also living expenses until the divorce is finalized and the assets are distributed.  Nicole Noonan, who is a former New York matrimonial attorney, and is now director of client services at BBL Churchill Group, will be featured on GMA for her efforts to assist women that are short on cash re-gain some bargaining power through the short-term loans her company can provide them.  This is an incredible solution to a problem I’ve been grappling with the last 15 years as a divorce attorney in DC.  Here is why:

1. Credit cards– Many have already maxed out their limits, or perhaps they have no credit of their own and have been cut off from their spouse’s cards, so often these are not an option.  If it is an option, it is often at a very high rate of 18% or more.  That is a really steep price to pay.

2. Family & Friends– Few are in a position to really lend much money, but even so you need these people for emotional support and that is worth its weight in gold.  Borrowing money from them is going to put an added strain on your relationship with this core group of people that you will need to get you through this tough transition period in your life.

3. Retirement Funds– If you raid your IRA or 401(k) to pay for legal fees, you will most likely have to pay taxes and penalities if you are withdrawing the money early, and before you consider this option, you really need to talk to a financial advisor and weigh the pros and cons very carefully.  Furthermore, in many states you are not supposed to raid a marital asset during the divorce process, so this may not even be an option, so you need to check with an attorney before you do anything rash.

Matrimonial attorneys are not allowed to take cases on a contingency– there are ethical rules that prevent us from doing this, and there is no greater strain to the attorney/client relationship than the issue of financing litigation.  High conflict cases can be very pricey– experts, subpeonas, depositions, custody evaluations, court appearances all add up quickly.  There is nothing more frustrating than not being able to execute certain strategies because your client cannot afford them, but the fact is if you are going to war, you need to have a war chest.

Kudos to Ms. Noonan and BBL Churchill Group for coming up with a wonderful alternative that restores some balance in the negotiation process for couples divorcing and helps preserve the attorney-client relationship!

By Regina A. DeMeo, Esq.