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Law Articles

Litigation loans for matrimonial matters 20/05/2022

Divorcing or dissolving a civil partnership can be expensive. Even when there is agreement between the parties as to the main issues, including division of matrimonial assets, there will be court fees to pay, the cost of legal advice and the drafting of the necessary documentation, and professional fees relating to any pension and property expert reports. Most law firms will require “money on account” to undertake work for their clients, which means that the client is always making pre-payments against their solicitor’s hourly rate and any disbursements they incur in the matter.

There are very limited circumstances where Legal Aid is available so most people will need to fund their divorce legal fees themselves.

Some people will have savings they can use for this purpose, whilst others will need to consider borrowing from family or friends, relying on credit cards, taking out an unsecured loan, borrowing against equity in property, or utilising overdrafts. A relatively recent alternative option is a litigation loan, which is a commercial loan from a bank or other financial institution that specifically funds legal matters.

A litigation loan is a formal and legally binding consumer credit agreement. The provider will want to ensure the affordability of any loan being applied for and will expect to see evidence of the applicant’s present and anticipated financial circumstances to inform their decision on whether to approve it.

The interest charged on the loan will vary depending on the provider, and there may be an initial set-up fee. The repayment of the loan generally comes from the proceeds of the financial aspect of the divorce settlement. This can be beneficial to those who have little liquid assets at their outset of their divorce or dissolution, but are confident that will do by its culmination, perhaps from the sale of a property. Many litigation loan providers insist that consumers receive independent legal advice from a source other than the solicitor acting on divorce before they will grant the loan.

Solicitors are bound by the Solicitors Regulation Authority to act in each of their clients’ best interests. This includes ensuring that the costs of the work to be done can be met, and your solicitor will talk to you about future anticipated costs throughout your case. A litigation loan may be mentioned by your solicitor as an option for funding upon instruction, but it may come up whilst your case is underway in response to changed circumstances. This will be part of a conversation that involves looking at the options and highlighting the pros and cons of each option so that you can make an informed decision.

For further information and advice on this issue, and other family law issues, please contact us for a free initial consultation on 01992 306 616 or 0207 956 2740 or email us.

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Manor Law Ltd, trading as Manor Law Family Solicitors, is a registered company in England and Wales - number 7977350, and is authorised and regulated by the Solicitors Regulation Authority - Hertford office SRA number 567506 and City of London office SRA number 568637. Copyright © Manor Law, 2016. All rights reserved.
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