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Funding A Divorce: What are the Options?

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The divorce of celebrity chef Marco Pierre White and his wife has recently been in the newspapers.  According to media sources, Mrs White was forced to act in person in the divorce proceedings due to escalating legal costs and her inability to raise further borrowing to finance her case.

This case highlights a common problem amongst divorcing couples - funding.  How a case is to be financed is an issue for all clients and it is essential that the client makes the right choice about how to fund their case at the earliest opportunity in order to avoid the difficulties experienced by Mrs White part way through the proceedings.

If a client's financial position means it is difficult for them to pay legal bills on a monthly basis, there are a number of other ways to fund a divorce case:

1.Public funding (formerly legal aid)

Available to individuals with an income below £28,000pa and capital of less than £8,000.  If the client is living with another person (not their opposing partner), that individual's financial resources will also be included.

A public funding certificate can be offered to cover various stages in the divorce and negotiation process.  It is important to be aware that the advice received is not necessarily ‘free' and there may be a monthly contribution to pay towards the certificate or a one off contribution at the conclusion of the case from the settlement received.  For more information about the eligibility criteria go to the Legal Services Commission's website at www.legalservices.gov.uk.

2.A litigation loan

A formal lending facility put in place by the bank to fund the case. Qualification for a loan will depend on the specific lender's criteria (unlikely to be available to individuals with capital of less than £100,000) and can be assessed upon an individual's financial position during the case or post settlement.  The bank will discharge legal bills when they fall due and the individual will be responsible for the debt as a personal loan or overdraft at the conclusion of the case.  Although interest will accrue on the debt, the liability that is created can be taken into account as part of any final settlement/Court order.

Credit cards are an alternative to a formal loan but interest rates should be considered.

3.Family or friends

If income makes an individual ineligible for public funding and there is insufficient capital to meet legal costs, the assistance of a loan from a friend or family member is another option.  The debt this creates may be considered as a ‘soft loan' for the purposes of any settlement (ie one that the individual is not considered to be obliged to repay) but the loan could be at a more preferential interest rate or even interest free.  This option may be particularly appealing to those individuals who have a poor credit rating and may struggle to secure formal borrowing.

4.Maintenance during the proceedings

Known as ‘maintenance pending suit' (‘MPS') or ‘interim maintenance', one party can apply to the Court for maintenance from their opposing partner while Court proceedings are ongoing.  Divorce and financial relief proceedings must have been issued before such an application can be made.

To be successful, the applicant must show to the Court that there is a shortfall in their monthly income need that can be made up by their opposing partner making a monthly maintenance payment.  The applicant's needs must be reasonable, having regard to the circumstances of the case. 

It is possible to include legal fees as part of an MPS claim, but only where all other options for the payment of legal costs have been exhausted.  If an applicant has capital resources available to them or would be eligible for a litigation loan, the Court is unlikely to include provision for legal costs as part of the maintenance award.

5.Pay at the conclusion of your case

If there is capital to be distributed between the parties which may not be accessible until the case is resolved, it may be agreed with the solicitor that costs are paid at the end of the case from the settlement.

The solicitor with conduct of the case will need to be clear as to the value of the assets in issue and costs will need to be carefully monitored to ensure that they can be met from the eventual settlement.

The increased use of the litigation loan facility has meant that this option is used less frequently, but some solicitors may still offer this option where a client has been turned down for borrowing.

Not all options will suit every client and it is a matter of choosing what works best for the individual, depending on their particular circumstances. 

What is most important is that the client is aware that different payment mechanisms exist.  Giving the client a choice not only improves the client/solicitor relationship when it comes to agreeing costs, but also provides the client with peace of mind during what can be an uncertain and anxious time in their lives.

Disclaimer: Anything posted on this blog is for general information only and is not intended to provide legal advice on any general or specific matter. Please refer to our terms and conditions for further information. Please contact the author of the blog if you would like to discuss the issues raised.