Financing The Divorce Process

August 8, 2022

Over the years we have received calls, from time to time, from women who are in the process of a divorce and have been cut off financially by the estranged spouse. These women are left in highly vulnerable positions, unable to pay bills and also unable to hire an attorney to help them resolve this unfair practice.* While they may not have access to the bank account any more there may be some other sources of cash available.

Here are some possible ways one can tap into an income source that they may not have considered:

Home equity line of credit: a HELOC is a credit line secured by real estate. If this line has not been fully used, there may be money available here. It is easy to access the HELOC by simply writing a check off the account. Often it is the case one can electronically move money from the HELOC to their joint or individual checking within the same bank.

401(k) Loan: Most 401(k) plans allow for loans. These loans typically have reasonable loan rates and have payment terms from 5-25 years. Many companies allow for repayment through the employee’s usual 401(k) contributions. It should be noted that if the employee leaves the company the loan will require immediate payoff. The benefit of a 401(k) loan is that, since the employee is making a loan to themselves, the interest is paid back to into the 401(k) account.

Life Insurance Cash Value: If the party has a whole life insurance policy there may be cash value available to withdraw or borrow against. Generally tax-free withdrawals are allowed up to the value of the amount paid in premiums over the life of the policy. Loans are not required to be paid back but will accrue interest until they are repaid.

Online Wallets: If there is a Venmo account or digital wallet that is linked to the cut off bank account they may still be able to pull in cash.

Credit Cards: Expenses could be charged to an existing credit card. Rates can be extremely high, depending on the person’s credit score, and even in the best circumstances the rates may be higher than a bank or personal loan. This is most likely not the first choice (and certainly not the best choice).

Divorce Financing Companies: These relatively new companies provide financing for the divorce process. Payment is due when the divorce is finalized. Eligibility is not based on income or credit score, but rather on the expected settlement value.

Less ideal options include borrowing from friends and family or even setting up a GoFundMe page.

These are a few ways that a spouse who is cut off from the family bank account can access money to assist with living expenses and attorney fees.

*While we understand, and agree, that attorneys must make money just as any other business does, we are dismayed at the dearth of pro-bono or low-bono opportunities for these women and hope this will improve in the future!

« Go back to Divorce Newsletters