Funding legal fees during a divorce

Although applying for a divorce or civil partnership dissolution has become more straightforward with the new ‘no fault’ law which came into effect in 2022, the resolution of financial matters remain complex. Each case is very different and some may settle within a month of negotiations, and others could take up to 18 months to resolve if they are fully contested.

Legal fees can increase quite quickly, especially if a case is in court proceedings and it is important to know how those can be funded if there are insufficient funds in one party’s savings to cover these.

There are several different options:

1. Borrowing from family and friends — this is referred to as a ‘soft loan’

Seeking financial support from family and friends remain a practical choice for covering legal expenses.

It is recommended that borrowers establish a written loan agreement detailing the amount borrowed, repayment terms, and any applicable interest. This agreement can also be signed in the presence of any independent witnesses.

Courts often categorise such loans as ‘soft loans’. If matrimonial assets are insufficient, the court may disregard the repayment of these soft loans from the matrimonial funds, assuming that family or friends are unlikely to pursue legal action for repayment.

The advantage is that there is likely to be more flexibility with the terms of repayment and therefore less pressure is placed on individuals.

Read our article on family loans for more information.

2. Loan from the bank or credit card — this is a ‘commercial loan’

Legal fees can be paid using credit cards, or an alternative is obtaining a personal bank loan, which may have lower interest rates compared to litigation loan providers (see below). Monthly repayments are typically structured to be affordable.

Courts generally prefer a clean slate for both parties, especially when matrimonial assets permit it and therefore are more likely to take these loans into consideration when dividing the assets. The family courts recognise the potential for the court action if these loans are left unpaid.

3. Litigation loan

There are several litigation loan providers who specialise in lending funds specifically for matrimonial finance cases. These loans can be used if there is sufficient by way of assets available in the matrimonial pot, but the funds are not accessible because, for example, they are tied in the equity of the family home or the spouse’s bank account which they are not willing to currently share.

Litigation loan providers do carry out thorough assessments on whether their loans are likely to be repaid from the settlement of the case. They will often provide drawdowns upon receipt of invoices from the solicitors.

The disadvantage of this loan is that interest rates are likely to be much higher than a commercial loan and certainly more than a soft loan.

If a spouse is unreasonably withholding access to available of funds from the other party, they can be placed on notice that the borrower will ask the court to make an order in which that spouse should be liable for the interest accrued with the litigation loan providers from their share of the division of assets.

Each case is individual and bespoke legal advice should be sought.

4. Legal Services Order

An application can be made to the court requiring the financially stronger spouse to pay the other’s legal fees via a Legal Services Order if they do not agree to do so voluntarily, and the legal fees can not funded by other means such as a bank loan or litigation funding. The court would require evidence showing that attempts have already been made to secure loans in alternative ways which have been unsuccessful.

To succeed, the financially stronger party must have sufficient income or funds to be able to fund their own and the other’s legal fees.

The applicant will need to provide a breakdown of the quantum of legal costs that will be required in their supporting statement.

In order to make this application, the applicant will first need to apply for financial remedy proceedings. It is also helpful to have evidence of the respondent’s finances, their income and assets, which is usually provided when exchanging financial disclosure in Form E.

The difficulty with this application is that it incurs legal fees to start the financial proceedings and the applicant would therefore need to find a way to fund the initial cost outlay.

Each case is different to another and it is therefore important to obtain legal advice on how best to proceed based on your own circumstances. Your solicitor will be able to provide guidance and options which better suits your individual position.