Our New Jersey readers may not know that a new financing industry that has emerged within the legal field. It is called divorce financing, and it aims to give litigants who wouldn’t normally be able to pay for their legal fees access to third-party funding. It generally comes into play when the opposing party is very wealthy and can afford to run up legal fees in an attempt to make their opponent give up.
While other areas of the law have used financing for some time now, divorce financing is a relatively new area. While some funding can be structured as loans, with interest rates comparable to credit cards, other firms use different methods. For example, a divorce funding firm backed by a New Jersey asset management company structures their investments in the outcome of the cases. With this model, clients do not have to pay anything up front, but rather give up a portion of the divorce settlement in exchange for the firm paying the legal costs.
Before any agreements are made, these types of firms spend a significant amount of time researching the client’s chances of winning a case in order to determine if it is worth financing. But if a divorce settlement is worth hundreds of thousands of dollars, the payout for these firms can be huge.
When it comes to divorce, the issue of property division between the couple can be difficult to agree on. Therefore, the matter often ends up in front of a judge. When this happens, there are generally two ways to handle the division of property. Some states will declare all marital property as community property, and will separate it evenly.
Other states, like New Jersey, follow a different method known as equitable distribution. Here, it is up to a judge to decide who gets what, according to what the judge thinks is fair. Sometimes the spouse making more money is awarded more property. It is important to note that usually a court does not divide specific property. Instead, it will determine a monetary value of the total property and award each spouse a percentage of it.
For divorcing couples it is important to understand how property division and settlements work. This will help ensure that each spouse gets their fair share of the property.
Source: The Gazette, “Iowa professor helps explain new financing options for costly divorces,” April 12, 2013