Divorce financing by private companies?

It seems there is a new trend in divorce (there are always new “trends”, but this one does seem new), the private financing of a divorce by a for profit company. In other words, when someone needs a divorce but cannot afford a lawyer, instead of borrowing from relatives, or if there is no way to borrow, there may now be a new option. It seems that if the stakes are high enough, or if there are enough assets to ensure a return on investment, people going through a divorce may now be able to borrow money with the settlement monies used as a sort of collateral. There is a story in the New York Times about this (click here for the story).

Is this a good thing? That’s a very good question. The obvious discussion might be “why don’t divorce lawyers simply do this?” The not so obvious answer (until you hear it) is that it would be highly unethical. Why? Because divorce lawyers should not be motivated to simply obtain as much as they can for their client, unless that is what the client wants. So, what if a lawyer’s fee is dependent upon a large recovery, and then their client decides they want to walk away with no money? Then there is a potential conflict because the lawyer will not be paid if the client walks away, yet the lawyer’s duty is to be governed by the client’s wishes. So perhaps this new idea, a loan or investment by a third party could help? I have not yet thought about it long enough to know if I support the concept or not. What do you think? Please post a comment.