Funding Your Legal Fees
The challenge of paying legal fees can prevent people from accessing the legal advice that they need. It is crucial that you have a plan in place to pay your legal fees that will enable you to see your case through to the end. Paradoxically, this can shorten the case as it can encourage the other party to engage with the process to achieve a settlement. At Family Law in Partnership our fees are highly competitive and we are happy to discuss flexible pricing arrangements. Click here for further details.
A variety of approaches may be adopted to cover legal fees: a client may begin by funding the legal fees themselves: later they may get informal assistance from a friend or family member or their former partner may agree to cover their legal fees. Sometimes they may need to take out a loan to cover their legal fees. Here we outline some of the options available to fund legal fees.
The main options:
Own resources: You may have your own income or savings to pay your legal fees as and when they are billed.
Family or friends:
- If a member of your family or a friend agrees to cover your legal fees, you might find it helpful to tell them how long the case is likely to take – you will need to speak to your lawyer about this. You might also want to get an assurance from your friend or family member that they will give you reasonable notice if they intend to stop the financial support – to give you a chance to set up alternative arrangements. You might also want to agree what information, if any, the family member or friend will be given about your case, so that they can make informed decisions about the support they will offer.
- If the money is being loaned rather than given to you, you should document these arrangements properly to increase the chances of the loan being recognised in the financial court case as a debt that you have to repay. Clear obligations need appropriately clear documentation if we are to persuade the court that they should be respected.
Commercial loan: Lawyers are not generally licenced to give advice on the commercial funding options available to you. But there is plenty of information online for example here. Consider taking advice from an IFA or financial planner on your funding options. Aspects you might want to think about are outlined below.
There are a number of finance houses which specialise in providing loans to fund litigation or family law cases. They include:
Other side pays voluntarily:
If you don’t have the money to cover your legal fees but your former partner does, they might agree to pay your legal fees for you. This is particularly the case where otherwise you might have to take out a commercial loan at a high interest rate to fund your fees with the result that the loan reduces the resources available for division. However, it is unusual for a former partner to give an open-ended commitment to fund legal fees and care is needed to avoid advancing to a critical stage in the case, only to find that your former partner has stopped paying your bills leaving you stranded. You will probably want to have a back-up arrangement too.
Interim financial provision:
If your former partner does not volunteer to cover your legal fees with the result that you might not be able to pursue your case, the court can require your ex to meet your costs. A separate hearing will be needed to assess the detailed requirements, for example:
- Whether you have run your case in a reasonable way, making an effort to settle and so on;
- Whether your lawyers offer a “pay at end” (as opposed to the usual monthly billing) arrangement. This is now rare but it would be a bar;
- Whether commercial lenders have been approached for assistance (see above).
Interim financial provision, however, has a number of drawbacks:
- Usually costs are not met in full
- Historic or pre existing costs are not necessarily covered
- There can be significant costs in pursuing the application
- There will be a wait whilst the hearing date is obtained and your own costs might rise whilst you pursue this claim
- Usually funding is only offered up to the end of the 2nd stage hearing in financial cases (the Financial Dispute Resolution) and a further application may then be needed if agreement cannot be reached.
On the other hand, obtaining interim financial provision can be a reminder to all parties of the overall impact of costs and it can encourage settlement discussions.
You should always take advice from an IFA or financial planner before taking on any form of financial obligation such as a commercial loan.
The matters highlighted below merely draw attention to the issues that you might want to bear in mind.
|Flexibility and scope
1) Will the loan be big enough to “see you through” and if it isn’t, if you take out the loan will this prevent you from obtaining other borrowing you may need?
2) Is there a minimum draw down amount? Can you borrow only what you need and in appropriately small chunks and at times that you decide? Many lenders are only licenced to provide a “fixed cost loan” where the sum is clarified at the beginning and extending it may be difficult – pitching the request at the right level can be challenging.
3) Some lenders offer assistance with living costs thus enabling you to avoid the expensive and potentially risky application to court for interim provision.
4) What happens if you change lawyers?
|Costs and hurdles as regards application
5) Is an application/arrangement/set-up fee charged?
6) Are credit reference checks needed, are you charged for these and will your cost of credit be increased by your score?
7) Are projections required as to the outcome of your case and if so are there costs of preparing that and what level of information is required?
8) Does the lender require you to take independent legal advice on the loan agreement and if so, what are the costs and formalities involved?
9) Where the lender requires an undertaking from your lawyers (us) is it one that we are actually able to give?
10) Some lenders are swiftly out of the frame because of their lending criteria – for example, because of the loan to marital assets proportion or requirements as to habitual residence or interim payments.
|Level of security
11) Is security required and, if so, can you provide this?
12) Will the lender charge you for taking security?
13) The interest rate (obviously) and on what element of the loan this is charged – on the amount drawn down or on the total amount of the loan?
14) Keep an eye on other charges, such as monthly fees or a fee on each draw-down or perhaps penalties for early or delayed settlement.
15) Different schemes have different rules as to what has to be paid as you go along – some schemes “roll-up” the fees and interest and other require monthly payment.
|Conditions as to settlement
16) There may be a deadline when payment in full is required – or increased charges might apply. Does that provide sufficient leeway for when funds are likely to be available at the end of your case?
17) You will also want to spot penalties that may be charged if you fall foul of any of the conditions.
18) Different schemes offer different level of back-up and speed for providing the funds.