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Litigation Loans

 

WHAT IS A LITIGATION LOAN?

A litigation loan is a essentially a divorce loan for a financial settlement case. The loan will cover your legal fees and any disbursements such as court form fees, valuations and expert reports needed for the divorce. 

HOW IS THE LITIGATION LOAN PAID BACK?

The loan will be repaid back from your financial settlement once your divorce is concluded not before. However, more often than not it is taken out against your home which will most likely be sold as a result of the divorce.

WHO WILL GIVE YOU THE LITIGATION LOAN?

A litigation loan company will enter into a contract with you to pay your legal fees directly to the law firm/solicitor. They may also accept the risk of paying for the other parties/your ex-partners legal fees if the judge awards their legal fees to you. You will need to discuss this with your solicitor.

HOW DO YOU GET A LITIGATION LOAN?

It is a solicitor or their firm that often recommend you to a litigation loan company. The application to the litigation loan company is done through the solicitor. They will ask your solicitor the following before agreeing to fund your case – 

    • How much are the assets involved in your financial settlement case worth?
    • How long will the case take to settle?
    • How much will the case cost in terms of legal fees?

IF A SOLICITOR OR THEIR FIRM RECOMMEND A LITIGATION LOAN DO THEY GET A KICKBACK FROM THE LITIGATION COMPANY THAT ARE GIVING IT TO YOU?

More often than not – yes they do. The solicitor or law firm will get a finders fee, arrangement fee or a recommendation fee. This will be on top of their legal fees being paid for your divorce case. However, please ask your solicitor. Sometimes this kickback can be disguised as something else so please be careful.

ONCE YOU ARE OFFERED A LITIGATION LOAN DO YOU HAVE A COOLING OFF PERIOD IN WHICH YOU CAN REJECT IT?

Yes you do. The cooling off period is about 7 days.

WHO WILL GET YOUR LOAN OR WHO CAN ACCESS IT – YOU OR YOUR SOLICITOR?

Your loan will be transferred to your solicitor directly in full or made available for them to withdraw as they need.  

Your solicitor should withdraw funds from your loan at 3 stages of the court proceedings for financial settlement – 

    • The FDA appointment 
    • The FDR appointment
    • The Final Hearing

If at any stage of your proceedings you and your ex-partner reach a settlement then the lawyer shouldn’t withdraw the rest of the amount so that interest charges are not triggered unless you are being charged interest on the whole amount from day one.

Please ask your solicitor whether they will access the full loan and put it in their bank account or just the amount they need at any one time.

ASK ABOUT THE INTEREST RATE AND HOW THE INTEREST IS CHARGED ON YOUR LITIGATION LOAN

You must enquire about the interest rate. Be careful because often the interest rate in astronomical for litigation loans. Please ask your solicitor or if you can the litigation company whether they will be charging interest on the total amount they have lent you or just on the amount your solicitor will withdraw from this amount, in the other words the amount of the loan you have used.

INSIST YOUR SOLICITOR ASKS YOUR PERMISSION BEFORE THEY SPEND YOUR LOAN AND INFORM YOU HOW MUCH THEY ARE CHARGING FOR EVERY PIECE OF WORK THEY DO?

Just because you are not paying straight from your bank account right now that doesn’t mean you are not paying your solicitor for the work they are doing for you. You are paying them indirectly but are still paying them. Therefore, DO NOT let them do what ever they want. You must ask them about the charges for every piece of work they do for you. You must make them answerable and control the amount of work they do, what they charge and how much they spend. 

You should ask for a statement of charges from your solicitor at regular intervals (weekly or monthly) about the amount you have spent with them. This statement should detail what work they have done for you that week or month. This is different from the statement you get from the litigation loan company which details your loan and interest charges.

There is a section you must read in our Help Guide called Solicitors. It is called ‘important points to remember when dealing with a solicitor’. Please click on the link below. 

LINK TO OUR L.I.P HELP GUIDE FOR SOLICITORS

YOU MUST ASK ABOUT THE ADMINISTRATIVE CHARGES FOR YOUR LITIGATION LOAN

The litigation loan company will charge you administrative fess to process and administer your loan. Please ask about these fees,  how much they are or how they are calculated. Do not over look these fees because most probably they will be added to your loan.

PLEASE INSIST OF REGULAR STATEMENTS TO KEEP YOU UP TO DATE WITH WHAT YOU OWE.

This is very important and will allow you to manage your loan and keep control of it. If there is something that worries you on your statement please question it.  

WHAT ABOUT NO WIN NO FEE LITIGATION LOANS?

Ask your solicitor about this type of litigation loan and whether it is right for your case. If your divorce settlement does not cover the litigation loan in total then the full loan will not be payable. Please be aware the interest rate may be higher for this type of loan.