Divorce Lenders: A Trend for the Wealthy That Should Trickle Downcarolyncastiglia
The New York Times published a fascinating article in their Business section this weekend about Balance Point Divorce Funding, “a new Beverly Hills lender that offers to cover the cost of breaking up — paying a lawyer, searching for hidden assets, maintaining a lifestyle — in exchange for a share of the winnings.” Balance Point is run by Stacey Napp, a lawyer-turned-banker-turned-entrepreneur who founded the company with funds she won after eight years of fighting with her now ex-husband for her piece of their marital pie.
Napp’s company lends exclusively (so far) to women at the “the lower end of the high end,” i.e. those with marital assets between $2 million and $15 million. But what about the rest of us? I’m sure there are thousands of women out there who could use not only a loan in order to free themselves from bad marriages, but also the strength of a financial backer who has a vested interested in them getting everything they’re owed out of their divorce proceedings.
Unlike Michelle Pont, one of Balance Point’s clients profiled in the Times article, I never “amassed millions of dollars in properties and investments from a freight-hauling business.” But like Michelle Pont, when I decided to seek a divorce, I was left penniless, not to mention homeless. Pont says “she wrestled with accepting a smaller settlement than she considered fair. Then a lawyer referred her to Balance Point Divorce Funding,” and the firm agreed to invest over $200,000 in her case.
When I knew it was time for me to get out of my rapidly dissolving sham of a marriage, I turned to the only lender I’ve ever known, who, like Balance Point, does not charge interest: my mother. Thanks to a small inheritance she received when my Grandparents died, she was able to pay for my divorce. I don’t know what I’d have done without her help. New York State had not yet adopted a no-fault divorce policy at the time of my break-up, which in hindsight I’m especially thankful for. Lawyers have argued that no-fault divorce “does not provide equal bargaining powers with respect to gender,” and since I had very clear grounds, I was able to sue my husband for an immediate divorce. If I hadn’t been able to afford a lawyer, I’d have had to file for separation and wait a year to get divorced, not to mention the fact that I wouldn’t have petitioned for maintenance, and I can only imagine how hellish it would have been to deal with the child support, custody and visitation arrangements.
Napp says she founded Balance Point “to ensure both sides can defend their interests.” She told the Times, “Everybody knows somebody where at the end of the day, the divorce was not equitable. We want to help those people, the underdog, to make sure they get their fair share.” Her client Michelle Pont is surely grateful for Balance Point’s financial intervention in her divorce. Pont told the paper, “I don’t view it as a loan; I view it as an investment in my future.”
The Times notes that “Balance Point is part of a bigger trend — the growing industry that invests in other people’s lawsuits, arming plaintiffs with money to help them win more money from defendants.” I was a bit taken aback when I read that statement, feeling as though these companies weren’t really out to help people, only wanting to cash in on our lawsuit-happy culture, potentially adding another hurdle for innocent people to leap over in the pursuit of justice. But then I realized that these lenders are offering loans to plaintiffs who are on the right side of the law. We’re talking about “securities fraud cases brought by disgruntled investors, whistleblower claims against corporations and property development disputes.” In other words, divorce lenders in particular are financing women who might not otherwise be able to help themselves. Napp says most of her clients “do not have jobs” and “often are raising small children.”
“Somewhere along the way a light bulb went off,” Napp told the Times. “I said, ‘I’m kind of a perfect storm. I know how to find assets, I understand litigation, I have resources — what happens to people who are missing even one of those elements?'” Exactly. In my case, my ex-husband committed such heinous acts that I was able to sue him for divorce. Yet because of the financial and life circumstances we found ourselves in, he was able to contact a lawyer about defending him before I had even figured out how to begin the divorce process. I walked away from our marriage without any money of my own; I can only imagine what that scenario is like for a woman without family to turn to for help.
When I was leaving my husband, I remember coming across information online about services for women who need help getting divorced, but looking again today, my search comes up empty. There are so few public or non-profit resources available for women in need of legal aid specific to divorce, and those that are available generally have a long waiting list. I feel confident that a company like Balance Point geared toward helping working class women would not only be financially solvent, but a gift to the women who find themselves in the position I did, needing a champion in their corner. The Times emphasises that while “most lawsuit lenders avoid any role in the management of cases, seeking to disarm critics who worry that lenders seeking profits will corrupt the pursuit of justice,” Napp, “by contrast, sells the benefit of her own experience.”
Of course there is the possibility, if this trend of legal lending grows, that some divorce dollars will fill the coffers of those on the other side: spouses who have cheated, stolen or otherwise ruined their marriages. That scenario seems more likely in regards to divorces that involve the splitting of immense wealth, so I suppose what I’m advocating for is a sort of legal defense fund for women who find themselves alone when it’s time to leave. Or a divorce lender willing to take a chance on a small-time claim.
A divorce lender is not a lawyer – they can’t fight fight a plaintiff’s legal battle for them. But they do have a financial stake in seeing the plaintiff win their case, since they are paid a percentage of the settlement. Even in small-time cases, that model seems financially viable, based on my own experience. Thanks to the wonderful paralegal who worked with me on my case, I was awarded maintenance that I never would have asked for, despite the fact that I needed and was entitled to it. A small fee could certainly have come out of that if necessary. (I’d love to be able to give my paralegal friend a percentage in return for all of her hard work, but for now, I’ve been paying her back in bags of homemade chocolate-covered popcorn. Thank God she likes that as much as money.)
The benefits of using a divorce lender are clear; women who would otherwise be unable to afford quality legal representation are suddenly able to do so, making the playing field more even in a game of what often becomes hardball. I love this idea so much, I’d like to meet Napp and shake her hand, then twist her arm into opening a Balance Point branch for those of us who don’t want millions, just the treatment we deserve.
Photo via Flickr