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Attorneys Vic Hill and Brad MacDonald

Lawsuit Lenders Enter Divorce Litigation Arena

Entrepreneurs are always looking for something potentially lucrative to invest in. Here’s an idea – divorce.

Stories have recently surfaced about fledgling companies that offer divorce insurance, where one or both spouses can buy a policy to safeguard against marital dissolution. In the event of a divorce, there is a payout, commensurate with the amount of premiums paid into the policy.

As sort of a flip side to this, some start-ups are now offering to provide funding to divorcing persons in exchange for a percentage of what is recovered. In essence, it is investing in another’s lawsuit, and helping a strapped plaintiff – who might otherwise have to forgo a lawyer, investigation, a careful search for assets, etc. – press on and hopefully extract more money from a defendant. If he or she does, the company that helps cover the costs shares in the winnings.

One such company is Balance Point Divorce Funding, a Beverly Hills lender that was started by an attorney following her own divorce. The founder, Stacey Napp, says that she was on an unequal playing field when seeking to divorce her ex-spouse, and nearly gave up.

“Everybody knows somebody where at the end of the day, the divorce was not equitable,” says Napp. “We want to help those people, the underdog, to make sure they get their fair share.”

One of Balance Point’s clients says that the company’s investment in her “is an investment in my future,” adding that, “They are helping me to get what is rightfully mine.”

“Lawsuit lenders” are still far and few between, but the number is growing in diverse fields that range from personal injury and security fraud cases to whistleblower claims and, as related here, divorce disputes.

Related Resource: “Taking Sides in a Divorce, Chasing Profit” December 4, 2010