Five ways to fund your divorce
With the average cost of new school uniforms around £240 – and a further £50 a week needed for school lunches, travel and activities – September and the months ahead can be particularly stressful for separating parents who are already financially stretched.
The lack of Legal Aid for most family law matters means that couples now have to fund their own divorces. This has left unprecedented numbers of people representing themselves in family courts, even in complex cases.
We have written previously about our concerns that public funding cuts are leading to a two tier family law system. Sound, professional support to guide couples through their separation and help them to resolve financial and children’s matters, should not be the preserve of the very rich and should be accessible and affordable for those who need it.
Divorce is a ‘distress purchase’ – that is an expense you haven’t budgeted for. So how do you fund a solicitor and the expenses associated with the process? Here are five options which we recommend you discuss with your lawyer at a first meeting as some of these may not be appropriate or available:
- Use savings or investments
If you have savings they may not be earning much interest so you could use them to pay for legal advice. You could also cash in ISAs or other investments; however do take independent financial advice regarding any such action and any potential tax consequences. If savings or investments are in joint names you may be able to reach agreement that certain funds be set aside to cover each party’s legal costs.
- Find a firm that specialises in litigation funding
There are litigation funding firms throughout the UK who offer credit schemes to fund the cost of a lawyer and all costs associated with the divorce. If you don’t have savings, are unable to borrow the money from another source, or have a low credit score, then this could be an option – although rates of interest are likely to be on the high side. You can find out details from us or from an independent financial adviser (IFA). Resolution, the association that represents 6,500 collaborative family lawyers nationally, including Jones Myers, has recently launched an online option with one such company.
- Use a Sears Tooth Agreement
Under a Sears Tooth Agreement you sign a deed to assign your financial settlement to your solicitor, who takes out their costs – including any court fees, third party costs and related expenses – before you receive your capital. This is not a popular option with law firms because of the potential risks involved because if you don’t receive the expected settlement they could be out of pocket.
- Draw on loans and credit cards
A bank loan with a competitive interest rate can be an effective way to fund legal costs. However, a bank will check your credit rating and will want assurance that you can meet the monthly payments. Funding your divorce on your credit card will incur high interest rates if you make minimum monthly payments – although this could be a solution in the short term or as a last resort. Some credit card companies offer 0% interest for six or nine months which is worth considering if a financial settlement is likely to be agreed in the same timescale as the interest free period.
- Ask your family
Although you may see turning to your nearest and dearest as a last resort because you are concerned about burdening them, a family member may be willing to help out with a loan until you receive your financial settlement. Be realistic and upfront about what you want – if you need £2,000 than say so at the outset, and spell out in writing that it is a loan and how – and when – you will pay them back.
You can keep costs down if you and your ex are both prepared to take a non-confrontational approach to your break-up. Using collaborative lawyers will avoid court battles and the lawyers will steer you through your separation and divorce, helping you to reach agreements that suit you both.