Can I use a loan to fund divorce and financial proceedings?

Research reveals that divorce rates increase following periods where couples are forced to spend an increased amount of time together. Peak periods include; September and the New year. Divorce lawyers around the globe are currently preparing for a spike in divorce rates once lockdown is lifted.

Over the next few weeks, we will be asking our Client Relationship Director for Family law Mandeep Randhawa to guide us through the main obstacles associated with divorce.

Divorce can be an expensive process and sometimes it is difficult to find the finance required to support you throughout. In today’s post, Mandeep considers the use of loans to fund divorce proceedings.

Divorce can be an expensive process and sometimes it is difficult to find the finance required to support you throughout. Obtaining a loan from a specialist financier is becoming commonplace, as it can greatly benefit you in achieving a constructive and accelerate proceedings. Here are a few scenarios where a specially structured loan is the best solution:

1) You are the financially weaker individual in the marriage and do not have the funds to meet legal fees. This may be because you are the spouse that has devoted time to raising the family and looking after the home and possibly your children. You know you are entitled to a fair share of the matrimonial pot, but to get that award you need good quality legal representation to achieve the best results. Utilising a Litigation Loan will get you access to a solicitor that you might not have been able to fund, due to a lack of liquid funds, and will ensure you maximise your award.

2) You want to start proceedings quickly, but to be able to pay for legal fees you may need to sell off some assets which will take time. A litigation loan decision can be made in as little as 48 hours, depending upon the funder, and you can instruct your solicitor straight away.

3) You may be the financially dominant party in the marriage, but your assets might be tied up in other ventures, for example properties or a business. Taking a dividend to pay for legal fees may have expensive tax implications, may affect your company’s growth and will affect other shareholders. In this case a loan may well be a far more cost effective alternative and will cause no disruption to the company or other venture.

4) Your income stream from your spouse has stopped and you are unable to support yourself on your own. Some lenders provide “living expenses loans” which will allow you to continue the quality of life you are accustomed to whilst your divorce process is underway.

The above list is not exhaustive and there are other situations where a litigation loan will be beneficial.

You may be asking “why use a litigation loan when I could borrow from friends and family?” The answer is that the Court will likely see loans from family or friends as “soft” loans, which may or may not need to be repaid within a particular time frame, and therefore may often not considered as a true liability in your case. A litigation loan from a specialist provider on the other hand will likely be seen as a “hard” loan that will require to be repaid within a time frame, and as such provision for repayment will be considered when dividing the matrimonial assets.

Specialist matrimonial litigation funders are relatively new financial institutions, so it is important to choose a company that is well established and has the reputation to be able to support you throughout the whole of your legal proceedings. We are able to advise you further as to the issues within such matters and provide information as to the options that may be available to you.

Here’s a quick guide to choosing a lender:

· Check their history, how long have they been financing matrimonial law?

· Look at the company’s publicly available accounts; are they in a healthy financial position?

· Do they employ matrimonial solicitors; will they understand your needs?

· Check their list of products, can they help you with living expenses or in case of emergency?

· Do they work with respected solicitors and barristers in the UK? If they trust them, so can you!

· Can they respond to you quickly; how long will it take you to assess your application?

· Do they have any funding limits? Will they fund your case to the end, if your case doesn’t settle at an early stage?

· Do they require you to service your interest monthly?

· Do they have any hidden fees, for example draw down fees, compulsory insurance, closing fees or similar?

· Will they provide lending to cover children proceedings as well as financial proceeding?

· Do they provide loans on an unsecured basis? If so, you won’t need to own or joint own a property to qualify for a loan.

Please feel free to contact us via email at enquires@garricklaw.com or via phone on +44 (0)203 196 7822 to discuss your matter and your funding options.