You've probably seen commercials for lending firms specializing in loans for people who are waiting for payouts from personal injury suits.  Lending firms, however, loan money for all sorts of litigation, including divorces.  It makes sense, considering that many spouses are in marriages where the other person controls the finances.  If they're stay at home parents with little to no savings, or involved in situation such as domestic violence, they could very be well be left with nothing to live on, much less use towards retaining an attorney. 

If you are one of these unfortunate individuals, it can be very tempting when a company offers you a six figure sum to go towards your legal fees and living costs.  Best of all, it doesn't need to be repaid until the divorce is settled.  Then again, loans come with conditions, such as interest rates.  Depending on the approved amount, the interest rate could be as high as 20%, which means you would need to pay back an additional $40,000 on top of a $200,000 loan.  Speaking of approval, this all depends on what you stand to gain from your divorce.  The lender would need to evaluate your marital assets, then determine the likelihood of them recouping the loan based on your financial and personal circumstances. 

Another critical factor is whether an amount – even six figures – could possibly cover your legal fees and current living standards.  This is difficult to determine if you have no sense of the marital finances.  Still, you could downgrade your lifestyle and live frugally during the divorce proceedings, but your attorney's fees are another matter.  The more acrimonious the divorce, the more sensitive the issues, the more likely you are to go to trial for a period of one or more years.  If you or your ex appeals the trial court's decision, you'll have to pay for more litigation, and perhaps hire experts such as psychologists and forensic accountants.  These additional costs may cause you to end up in debt, even if you win a favorable settlement.

This doesn't mean that divorce funding is a bad idea for everyone.  In fact, it may be a necessary evil for those are left penniless with no family or friends to turn to.  However, if it's mainly an issue of how to afford legal representation, that may be accomplished by your attorney filing an order to request the retainer from your spouse.  You should discuss this option with your attorney, as well as the pros and cons of borrowing from a divorce lender.  Keep in mind that defaulting on your loan can damage your credit score, which can wreak havoc on your life for many years into the future.  Thus, any decision that involves you being in debt for a large sum of money should not be undertaken without competent legal advice.    For more information on how to stay afloat during a divorce, please speak with the attorneys of Villani & DeLuca, P.C.