How Does Litigation Funding Work for Divorce?

But regardless of whether the divorce is amicable, chances are both parties will want to have a solicitor representing them to ensure they emerge from the proceedings with a fair deal.

The problem sometimes, though, is that one party does not have the means to pay for a solicitor to act on their behalf. If they don’t have enough money saved and aren’t eligible to benefit from legal aid, the whole ordeal can leave them feeling even more deflated.

While self-representation is an option, it’s definitely not for everybody. Divorce proceedings are now typically more complicated than ever, mainly due to the complex finances of both parties. If you are representing yourself and your partner has instructed professionals to act on their behalf, are you really going to emerge with the best outcome for you?

Divorce funding options

If you don’t have enough money saved to pay a solicitor and are not eligible to receive legal aid, there are some other divorce funding options still available to you:

Take out a bank loan - depending on your history with your bank, you may be able to secure a loan to cover the cost of your divorce. However, high compound interest rates and relatively low loan amounts often make this option a non-starter.

Use your credit card - similar issues to a bank loan. Plus, lengthy divorce proceedings can see the debt hanging around long into the future.

Borrow the money from a friend or family member - not everyone is comfortable doing this, understandably.

Apply for a Legal Services Payment Order (LSPO) - this is an interim order that you can apply for if you need money from your ex-spouse to pay for the services of a solicitor, payments to the court, or other legal fees. The main problem with LSPOs is that they are costly and cause delays to the proceedings.

Look to secure a Sears Tooth Agreement - In short, a Sears Tooth Agreement sees your solicitor(s) acting on your behalf for no fee upfront, with payment coming from any financial settlement you receive at the conclusion of the divorce. Some solicitors are not always keen to do this and securing such an agreement will really depend on your individual case.

How does litigation funding work for divorce?

There is another option available to you for funding your divorce: litigation funding.

Litigation funding for divorce is basically where a third-party (a litigation lender) provides a loan (a litigation loan) to you so that you can cover the costs of your divorce. The litigation lender gets their money back once your divorce has been concluded and you’ve received any financial settlement you are entitled to.

As with most types of borrowing, you will pay interest on the litigation divorce loan for the duration it remains outstanding. There will also be an admin fee, which is usually a fixed amount or a percentage of the total loan.

The good news is that once approved, most litigation lenders release funds to your solicitor quickly. They will usually do so in three tranches: your first appointment, the financial dispute resolution and the final hearing.

Best of all is that many litigation lenders do not charge early redemption fees. So if your divorce is drawn to a conclusion earlier than expected, you (a) won’t be penalised and (b) you probably won’t have drawn all the available funds, saving you money in interest.

Just be sure to partner with an established and reputable litigation lender to make everything as plain sailing as possible.