What Exactly Is a Divorce Loan?

Divorce Loans

By Stephanie Taylor Christensen

Money is cited as the number two reason that couples divorce. Ironically, it can become an even bigger issue once the marriage ends, and divorce proceedings begin.

Larry Rich, Divorce Magazine contributor and senior partner at Rich Rotsteinestimates average hourly rates for “intermediate level” lawyers and accountants, at $275 and $250, respectively.

Even in the case of a “simple divorce” in which both parties manage and agree to the division of assets, rates ranging from $400 to $700 for basic legal assistance aren’t uncommon.

If a decision cannot be reached, those hourly rates accrue throughout the processes of preparing a pleading, financial statements, court documents, periodic meetings with one another’s legal representation, and actual court and/or trial time.

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While hefty professional fees may be justified when they mean the difference between reaching a just settlement or accepting a less than balanced deal, divorce can wreak havoc on a person’s credit rating and cash flow, and compromise one’s ability to qualify for any kind of a loan in order to fund a lengthy divorce battle.

Enter so-called divorce finance firms, which offer loan options custom made to suit the unique monetary situation divorcees face. Here’s the scoop on how divorce loans work, and how they might prove to be a divorcees’ greatest asset.

Credit and income isn’t a concern.

Credit is often a key concern in a divorce, especially when one spouse managed most of the household finances, held financial accounts in his or her name, and served as the primary breadwinner.

Likewise, when one spouse hides or moves assets, or threatens to default on shared loans and mortgages, even divorcees with plenty of income and previously stellar credit may find themselves unable to secure loans and lines of credit in the midst of divorce proceedings.

In such situations, divorce finance firms can be the light at the end of the proverbial loan tunnel.

Nicole Noonan, director of client services at B.B.L Churchill Group Inc., one of the countries largest and most established divorce finance firms, explains that because the firm’s business model is customized to fit the unique situation of a person going through divorce, income and credit scores aren’t considered as part of the qualification criteria for a BBL Churchill loan.

“We are focused on the entire marital asset pool and based on that, the likely ‘in hand settlement’ at the end of the case.” That being said, however, divorce financing is typically geared towards clients of a certain income level.

At BBL Churchill, for example, the expected settlement is generally $200,000 or more.

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You’ll get your money quickly—and can keep it.

Given that qualifying for a divorce loan has nothing to do with current financial status, divorce finance applications are rather short and to the point.

The BBL Churchill paper application is a one page form that can be accessed directly from the firms’ website. Asking for little more than standard personal information and contact information of the applicants’ legal representation, the process shouldn’t take more than a few minutes to complete.

Once the form is submitted, the decision to approve is based on information provided to BBL Churchill by the applicants’ lawyer, and subsequent analysis of the expected settlement by BBL Churchill’s in house underwriters.

A prospective borrower can expect a loan decision within 72 hours from the time the firm makes contact with the client’s attorney. If approved, funds can be used to cover living expenses, expert costs, and/or legal fees.

While divorce finance firms vary on loan repayment terms, BBL Churchill doesn’t require any loan repayment until a settlement is reached. When it is, the loan is paid in full to BBL Churchill from the client.

In the event that settlement terms involve selling assets, Noonan says her firm works with the client for repayment, including waiting for the sale to take place when necessary.

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Rates aren’t low—but they’re not outrageous.

Given that divorce finance firms like BBL Churchill aren’t based on credit and income, they bear significant risk in loaning money. That said, rates aren’t necessarily low, but Noonan says they are akin to credit card interest rates.

Regardless, the long-term value of a divorce loan can far outweigh the cost, specifically if the money leads a person to invest in the resources to discover bank accounts one spouse isn’t aware of, or locating paper trails and gifts of significant value that were made to a third party.

“While a loan could cost an additional interest rate, this could be more then offset by the pay off received when additional assets are discovered,” says Noonan.

Worry-free repayment.

Though clients may not have spare funds at the time they take on a BBL Churchill loan, there is a peace of mind factor in that the settlement in and of itself repays the loan.

Thanks to its underwriting expertise, Noonan says that a client has never gotten less than an expected settlement, and BBL Churchill has never been left holding the bag for a loan.

Image: iStockphoto