Divorce is not only heartbreaking, it is expensive. Paying for it is more stress at a time when stress is off the charts. What if you don’t have the cash? The answer for some is divorce funding. I did not know that such an option existed? Relax, you are not alone.

Hope you don’t need it for yourself. But just in case, here are the details.

What is it, how does it work

Divorce funding is a loan against the final settlement of the divorce. Think of it as an advance. Money borrowed from private lenders can be used to pay a lawyer, forensic accountant, or appraiser, as well as living expenses.

Eligibility is based on the proceeds of the expected divorce settlement, not current assets, income or credit rating, says Russell Marnell, a divorce lawyer and director of the Marnell Law Group in Melville.

The borrower may have to sign a promissory note, or a binding obligation to repay at the end of the divorce, after the marital property has been divided. The divorce process can continue to the finish line without interruption due to lack of money.

Advantages

Without a doubt, a divorce is an expensive item. The total cost of a divorce in New York City ranges from $ 5,000 to $ 37,000. “A more complex divorce can cost a lot more,” says Nicole Noonan, CEO of New Chapter Capital, a Manhattan divorce finance company. A contested divorce can cost 10 times as much, especially if it goes to trial, Noonan says.

“Borrowing allows you to finance the costs of the divorce without compromising your cash flow or your ability to pay everyday expenses. In a more contested case, it also allows the unpaid spouse to access funds to hire the lawyer of their choice … without requiring the intervention of the court ”, explains Michael Mosberg, partner at Aronson Mayefsky & Sloan at Manhattan.

Having good advice is essential. “I tell clients to beg, to borrow and to do whatever they can to be able to hire a suitable lawyer… that can take a heavy toll on the bottom line,” says Darrin Giglio, chief investigator for North American Investigations at Mineola. As a private investigator, he often investigates cases of infidelity, custody disputes or hidden assets.

The inconvenients

The big question is, do you have to go into debt to pay for a divorce? “There are so many things that are financially unknown after a divorce that taking out a loan… Melville.

Dori Shwirtz, divorce mediator and coach at DivorceHarmony.com, is against the loan. “Divorce is stressful enough, why accumulate more debt? “

This debt is not cheap either. “If an unsecured line of credit is 5%, the divorce funding would probably be at least 6 or 7%, maybe up to 10%,” says Jack Choros, marketing director of SophisticatedInvestor.com.

Attorney Fern Frolin, a member of Mirick O’Connell’s Family Law Group in Boston, said she didn’t feel comfortable recommending divorce funding to her clients. “If I can’t assure a client that they will receive enough at the end of the deal to pay off the loan, I don’t think it’s ethical to put my client out of business so that I can get paid.

Explore options

Aviva Pinto, director of the Long Island chapter of the National Association of Divorce Professionals in Garden City, suggests other strategies for funding a divorce. Consider a home equity loan (both parties should sign on common property), personal loans (you must show separate assets and have a good credit rating), or borrow from family or friends, she suggests. she.

Another option, says Pinto, is a home equity line of credit. It allows you to borrow up to 85% of the value of the house. Instead of getting the money as a lump sum up front, you can withdraw the amount you need when needed. But again, both parties would have to agree on a condominium house.

The best alternative, says mediator Shwirtz, “is mediation where both parties make all the decisions for themselves – not a judge and lawyers in a duel. And it’s also a lot easier on the wallet. No borrowing necessary.

Melissa Fecak, lawyer at South Jersey Divorce Solutions in Merchantville, New Jersey, says mediation cases can cost a third of a typical court divorce. A collaborative divorce can cost more than mediation, but is often less expensive than a contentious divorce. She says: “Not all divorces lend themselves to out-of-court options, but in the majority who can, the parties find that they have a higher level of satisfaction, are more likely to cooperate with the end result and spend less money in their divorce.


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