New Business: Let Me Fund Your Divorce! (For A Cut Of Winnings)

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New firms finance divorce costs in exchange for part of their client's earnings.

Divorce can be a messy business. As if the emotional fallout from a broken marriage weren't stressful enough, the legal bills and settlements are a major point of concern for spouses who have an entire lifestyle to lose. In response to the rising costs of divorce, firms like Balance Point Divorce Funding have begun investing money into divorce proceedings for a cut of the winnings. 15 Common Divorce Mistakes

Balance Point was founded by Stacey Napp, who says she has invested more than $2 million into the divorce cases of 10 women. Napp, who has a law degree, started the business using money she won in her own divorce, and since then, private investors have helped Balance Point stay afloat. The first case will likely close within a year, providing Balance Point with its first profit.

 

We're aware that it sounds a little shady for a firm to cash in on the misery of a divorce, but apparently, the business is doing well enough to warrant coverage in the New York Times. Here's how it works: the lender (in this case, Balance Point) covers lawyer fees, the search for hidden assets, and the cost of keeping a lifestyle. Since Balance Point does not charge interest, clients can ask them to fund the case until it closes, even if it takes years and years. In exchange, the client pays Balance Point of a percentage of the winnings. Divorce Insurance: Depressing Or Practical?

Balance Point tends to attract a very particular clientele. According to the Times, customers are jobless women who are raising young children. Their husbands run their own businesses, which complicates the investigation into finances. Napp aims to focus on clients with marital assets between $2 million and $15 mllion since the super-wealthy tend to resolve cases comparatively easily. When you're rich, you walk away from a divorce with a reasonable chunk of cash; however, when you're on the "lower end of the high end," as Napp calls it, you're more likely to lose the comforts funded by your spouse's income.

It's a smart concept, really. Divorce lawyers are expensive, and most states require clients to pay upfront. If you already know that you don't have enough money at the moment to fund a reliable lawyer, let alone enough to maintain your comfortable lifestyle, having a firm offer to fork over the $100,000 or so can be a godsend. If they help you afford a good lawyer, you'll be more likely to win more money, which also helps the firm. Everybody wins.

Critics have voiced concerns that firms like Balance Point will manipulate cases to earn a bigger profit. Napp, however, assures us that her company only pays for the cases. It does not manage them, and she does not tell clients to settle. Instead, Napp hopes that the fact that she won her divorce lawsuit will speak for her legitimacy as a seeker of justice.

Does this sound like a good idea? If you were getting divorced, would you seek financial help from a firm like Balance Point?