Divorce: A New Opportunity For Investors?

Anyone who has been through divorce understands that it can be an expensive endeavor. Familial income that once supported a single household must be split between two residences and assets that were once shared must be divided. Determining how assets and debts should be fairly divided is often a highly contentious matter, requiring many hours of work on the part of family law attorneys.

This can be difficult in any situation, but when the separating spouses are on unequal financial footing, the costs of divorce can prove particularly challenging. The spouse with more limited financial resources may be inclined to agree to less than he or she is entitled to, simply to finalize the divorce. The spouse who is more financially secure may recognize this disparity and use it to his or her advantage.

Increasingly, investors are also recognizing this disparity and turning it into an opportunity. In some divorces, wealthy investors are offering those with more limited resources financial backing, intending to profit from the ultimate settlement or judgment.

In many ways, this renders the separation more equal; if both separating spouses have sufficient financial resources to manage while the divorce is being sorted out, neither will be forced to settle prematurely and the issues can be decided on merit rather than resources. Ultimately, the beneficiary of such an investment may receive more in the way of property or spousal support than he or she would otherwise receive.

However, this practice poses some practical concerns. The fact that a person can secure financial resources to prolong the divorce does not necessarily mean that it is a pragmatic decision. In the midst of a contentious divorce when emotions are running high, it may seem worthwhile to fight every possible point — but this is not necessarily the best way to move forward with life following divorce.

For investors, this may be a sound financial decision; the rate of return for this type of lending can be very high. The investor's profits come from the person receiving the investment, though. Money that could otherwise be used to help rebuild a life after divorce will go toward repayment of the loan.

When preparing for divorce, it is important to consider all of the options and to remain focused on the ultimate goals. The advice and representation of a knowledgeable family lawyer can prove invaluable. For more information regarding divorce and the use of outside funding, speak to a family law attorney.