“Profiting From Divorce”

There’s an interesting article in the NY Times this morning about the apparently shameful business of investing in people’s divorces. Hard for me to get too worked up about it.


The story, which you cannot read without registering (but it’s free), is entitled “Taking Sides in a Divorce, Chasing Profit.” It’s about companies that are setting up funds to pay for the costs incurred in an adversarial divorce by parties (usually women) seeking to recover more than their spouse is willing to provide to them. The “divorce lender,” if you will, evaluates a divorce case and decides whether it looks like additional funding would pay off in the form of a higher recovery than Daddy Warbucks is offering. If so, the company will advance money to his wife in exchange for a share of the additional recovery.

It’s obvious that the writer finds the whole idea unseemly. I’ll let you read for yourself, but the message I get from reading the article is that the businesses that choose to enter this field are profiting from the suffering of those whose marriage is breaking up. Yes, they are. Just like undertakers profit from death, preachers profit from sin, police profit from mayhem, and NY Times writers profit from boredom. And in fair disclosure, just like I profit from the misery of people whose marriage is ending.

The article likens the practice of divorce lending to that of lending for personal injury cases, but there’s a distinction. A personal injury lawyer can take a case on a contingency fee, an arrangement in which the lawyer gets a share of any payment actually made by the defendant but gets no fee unless there’s a recovery. That contingency fee assigns to the personal injury lawyer a significant part of the risk of litigation. In a judicial system that works well, the lawyer decides in advance whether the case is likely to result in a significant recovery and devotes the most resources to those cases where the injury is most egregious and the defendant most wealthy.

That option’s not available to divorce litigants. The ethical rules of my bar association and almost all others prohibit me from taking a divorce case on a contingency fee. As a society we have decided that we are willing to allow personal injury lawyers to become financially interested in a case but not divorce lawyers. The result is that when Daddy Warbucks divorces his wife, he has a huge tactical advantage, some would say a strategic advantage. Divorce court judges often attempt to level the playing field by awarding attorney’s fees and other costs to the party with lower income, but those awards almost always come – if they come at all – at the end of the litigation. What’s a woman to do during a lengthy, protracted divorce case while Daddy Warbucks works actively to starve her into submission?

That’s where these divorce lenders come in. If you’re unfamiliar with my practice, you might think I’m sympathetic to divorce lending because it makes more money available to divorce lawyers. It does, but that doesn’t do me any good. My practice is focused on couples who are able to be reasonably cooperative, so these $100,000 divorce cases just aren’t my gig. I’m more the $250 plus filing fee type.

No, my recognition of the value of divorce lending comes from hearing hundreds of stories, year in and year out, of women who know their husbands are stiffing them, who know their husbands are hiding assets from them, but who can’t prove it and therefore settle for far less than a judge would give them. If divorce lenders can level the playing field a little for a few of those women, I say good for them.

7 comments to “Profiting From Divorce”

  • John

    Lee~
    I ran into you four years ago when first facing the prospect of divorce. I have off-and-on run into your posts (each time “she” drags something up again). There is another side to this–you already know it, I know from what I have read in your posts.
    It is a sad commentary, but as long as Judges are more interested in RULE than in Justice…there will be none. Every nickle that becomes available to my ex-wife is spent “chasing” more money–just like the winnings of a compulsive gambler always go to the casino.

    At our divorce, I was making approximately 70K. We had just purchased a 130K house. 2nd mortgage of 30K to pay-down credit cards. Another 17K in C.C. debt (most of it her personal debt). My Parents had given me the house I grew up in shortly after we were married, and I foolishly titled it jointly. That is what my attorney called it, but(in my eyes)not nearly as foolish as missing the affair across the road…it may have had something to do with the two full-time night positions I worked so that she could stay at home with our children.

    But because of the long(17 years) marriage, and her lack of her employment history. Judge Anderson (Houston Co)saw me as Daddy Warbucks. I lost both houses, and in addition to the children, I get the privilege of supporting her and her boyfriend in the house that I continue to pay for to the tune of $1000/mo. Just so the math is straight, I was bringing home close to $3400/mo after deductions…and C.S. was $1235. So, I guess one could conclude she collected twice as much as I did to feed my children and sleep with my neighbor.

    I did get one of the children in a custody fight (all wanted to come, but she was the only one who had actually attempted suicide)…the daughter(17) the b.f. molested had already moved out, my 12 yo daughter did not have a specific “actionable” complaint, and my 8yo son with a rare disorder, “although perhaps better served by a nurse caregiver…most children are not afforded that benefit, and it is not a compelling reason for a change of custody”

    The TRUTH as I see it is this: whether speaking of taxes or laws. The dregs of society will always get a free ride, and the ultra wealthy, nearly free. The burdens will always be borne by those in the middle. Ultimately, it is the apathetic application of the LAW by nonchalant judges, and self serving legislators that maintain this sad state–until there is not enough “middle” to hold us all up.

  • Very interesting case. But can’t you call an investigation on firms who do contingency fees on divorces, since as you said, the option isn’t available for divorce litigants? And does the rule apply across all states?

  • 100% of all divorces were caused by marriage… That is a fact.. Most of our clients come from divorce and I have yet to see anything positive with the situation… Great articles Lee…

  • Heather

    Are you going to be blogging about Senate Bill 196? I am very interested to hear what you have to say.

  • I’m afraid I’ve been neglecting the blog lately. Thanks for bugging me; I need to get back into the habit!

  • Divorce can be a drawn out process, especially if there’s a custody battle involved and one or both spouses let bitterness come into play. Divorce lending is a fairly good option for these cases, especially if the applicant has had emergency expenses come up outside of the divorce.

  • Hi there,

    I thought I should comment on this phenomenon – I think that this kind of lending is what you’d call a necessary evil; I think everyone should be empowered during divorce proceedings in order to achieve a fair playing ground for the duration of the divorce. If you think of it in terms of empowerment, it makes perfect sense.

    Alana

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