With the current economic climate, there is increasing awareness around proportionate costs for clients, and how to fund legal fees generally. In Family law clients may well be asking – How can I fund my divorce? It is difficult to predict the overall cost accurately, as there are so many variables and options available to help reach an agreement.
Can I borrow money from friends or family?
Often, a client will say they can borrow money from family or friends to meet legal fees; but this should always be considered with caution. Friends and family, if financially able, want to help, which is entirely understandable. However, the court, more often than not, views this money as a ‘soft loan’ (meaning it does not need to be repaid) rather than a ‘hard loan’ (meaning it does need to be repaid).
Usually, when splitting the marital pot (which is the combined total of all monies and assets from both parties), any debts are taken from the assets, before the division takes place. This means credit cards, car loans or personal loans will be deducted from the marital pot first because they are a ‘hard loan’ –the company who loaned the money would enforce the contract if payments were not made. If you do not pay a credit card, car loan or personal loan repayment; it is will likely action will be taken. It is for this reason, that when the overall division of assets is considered, these types of debts are deducted from the pot first.
In contrast, ‘soft debt’ is considered unlikely to be enforced – this is the usual view of money from friends or family. In practice, this means these funds will not be deducted from the marital pot first, as the view is the family member or friend will not insist on payment if it will cause financial hardship. If a friend or family member has loaned money, and there is a disagreement about whether this money should be repaid to the family member or friend, the court will assess whether they view it as a ‘soft loan’ that does not need repaying or a ‘hard loan’ that does. This assessment will also take place if there does not appear to be sufficient assets within the marital pot to meet the parties’ needs.
This can be critical, because if the debt is deemed to be ‘soft’ and is not taken into account before the assets are divided, it may mean you have to pay that back from your portion of the overall settlement. A ‘hard debt’ would be taken before the asset split, and so you would not need to.
Can I get a ‘litigation loan’?
There are professional providers who provide funds for litigation, know as a ‘litigation loan’ and this would be a ‘hard loan’ but whether this is an option is dependent on the case.
There are different companies who offer this service with different criteria to be met before they will offer a loan. Usually, a lump sum is provided which does not need to be repaid until your case has concluded. The benefit of this, is the funds are there and able to be used, alleviating concerns on finding the funds to pay legal fees throughout your case.
This is potentially a good option for those who have capital assets (e.g. property) but not enough liquid capital (e.g. cash in the bank or savings) to pay for their legal fees and ongoing living expenses.
The availability of this option will depend upon the assets in the case, and interest rates will vary. There is no guarantee this option will be available, and it is down to the lenders discretion.
Can I ask my spouse to pay?
Sometimes, Spouse A earns more than Spouse B. Or perhaps Spouse A has accessible cash reserves in savings, but Spouse B does not.
In this situation, there may be a disparity in the ability of both parties to pay for legal advice. As a result, Spouse A can be asked to pay the legal fees of Spouse B, or to make payments monthly to Spouse B until an agreement is reached. If Spouse A refuses, an application for a Legal Services Payment Order (LSPO) can be made, which will order Spouse A to provide funds to Spouse B.
If a LSPO application is required, and is successful, Spouse A will need to pay the costs, meaning if they have the resources to pay then it is more cost effective for them to do so voluntarily.
Moore Barlow are not able to provide financial advice on any loans or liabilities incurred and how legal fees are paid for are entirely a matter for a client to decide based on their individual situation. However, options to investigate can be provided.
How can Moore Barlow help?
Our expert family solicitors have a wide range of experience in dispute, including trained mediators and collaborative lawyers. Our team can discuss your particular needs and advise you on the options available to you.
If you would like further information, please do not hesitate to contact one of the team who would be pleased to discuss your needs.
