Borrowing Money for Legal Fees in Divorce

Lauren Gaines

What if I can’t afford a lawyer for my divorce?

When navigating a divorce, it is widely understood that legal advice at the very outset is hugely important, to help those in such circumstances to understand what will need to be considered to them specifically, what their options are and the next steps.

Whilst an initial meeting is generally accessible at most budgets, for many, legal fees for representation throughout the process can often feel unaffordable in the context of their existing savings or income. In such circumstances, many people borrow money to meet their ongoing fees.

Family lawyers are not qualified to provide financial advice, so it is recommended to talk to a financial advisor before borrowing money.

Borrowing from family and friends

In the event that you are considering borrowing money from family members or friends to fund your divorce, it is important that you are first aware how such loans are treated by the Court.

Whilst the low-interest rates and lack of explicit time constraints will be an attractive feature of borrowing from friends and family, the treatment of such loans can often lead to disputes and therefore additional costs during a divorce or separation.

When considering debts incurred by either party to a divorce, you will likely hear lawyers refer to these as ‘hard’ or ‘soft’ loans or debts. Often, the Court will perceive loans from family or friends as soft loans. A soft loan is a loan whereby a failure to repay the loan (which may or may not be expected to be within a specified timeframe) is unlikely to be enforced or incur financial penalties. If the court deems a loan to be a soft loan, it will not consider it as a true liability in your case and it will not be taken into account in in the overall financial settlement.

Borrowing from the bank

It is not uncommon for individuals to fund their ongoing legal fees by taking out a bank loan or credit card, where they don’t have sufficient liquid capital or disposable income available. Such debt is generally considered to be a “hard debt” which must be paid back, given it comes with a contractually binding obligation to a third party and penalties are incurred if not paid back in accordance with the agreement. Hard debts are generally taken into account in the division of assets in a divorce.

Litigation loans

These loans can be used if there are funds available in the matrimonial pot but they are not accessible because, for example, they are tied up in property. Litigation loan providers will only lend if there is an obvious way for the loan to be repaid from the divorce settlement. This would be considered a hard debt in a divorce settlement. Because of the risky nature of these types of loans, they tend to have very high interest rates and are therefore not usually advisable unless other options have first been explored.

What if my spouse can afford to pay?

The general rule is that you are responsible for paying your own legal fees. However, if:

• your spouse can afford to pay both their fees and yours;
• you do not otherwise have the means to pay your own fees; and
• you are unable to obtain commercial funding or a litigation loan,

you may have a claim for your spouse to pay your legal fees.

If they do not agree to fund your legal fees, then you would make an application to the court for a Legal Services Payment Order, which is an order requiring one party to contribute towards the other party’s legal fees.

The difficulty with this application is that it incurs legal fees to start the financial proceedings and you would therefore need to find a way to fund the initial cost outlay. Everyone’s circumstances are different, and it is therefore important to obtain legal advice on how best to proceed based on your own circumstances.

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