Is it ethical to make money by investing in someone else’s divorce? That’s the question raised by a fascinating story in today’s New York Times about a new company founded, unsurprisingly, in Beverly Hills, that finances people who don’t have enough ready cash to take their divorces to trial.
Called Balance Point Divorce Funding, the company was founded by divorcee and lawyer Stacey Napp, whose ex-husband, David, she claims, tried to hide his assets when she left him. She sued him and after eight years of legal battles, prevailed. Now she offers to finance other women who want to sue their spouses for a larger share of the marital assets, but don’t have the liquidity to do so. In return, Balance Point gets a cut of the winnings. (More on Time.com: Will the Market Kill Your Marriage?)
Marital dissolution, which has been a good business for lawyers for years, is now drawing the eye of other industries. A new company called WedLock offers divorce insurance, party suppliers will set you up with your own divorce cake and gifts, there are several divorce magazines and websites, and the Huffington Post has an entire section devoted to divorce.
But Balance Point, which will bankroll your divorce, is a new phenomenon. It has a pretty specific market; Napp says she tends to work with women, usually moms whose primary job is raising small kids and whose soon-to-be-exes run their own businesses and can therefore control (or hide) the flow of information about finances. The net worth of the individuals is usually somewhere between $2 million and $15 million. (More on Time.com: Who Needs Marriage?)
In Napp’s experience, couples with more money than that often have pre- or postnuptial agreements, or can afford to divide up the assets in a way that won’t materially affect the quality of either of their lives. “Anything south of $15 million, when you divide that in half and take out the legal fees, you’re not in the same house, you’re not taking the same trips — your life is different,” she told the Times. “You can’t maintain that same quality of life that you’re used to.”
Some consider the investment as a lifeline for financially disadvantaged women, another example of women using their rising economic power to help others. Others think it encourages divorce, or more litigious divorce. Most states require that lawyers get payment for divorce cases upfront, to discourage the marital equivalent of ambulance-chasing and to make potential divorcees wait a beat before filing.
Napp says she advises clients to seek a settlement; a long and costly legal battle could lower her returns. However, since she’s offering an investment, not a loan, it’s not in her interest for the couple to reconcile either. (More on Time.com: Can an iPhone App Save Your Marriage?)
So far, Napp has spent about $2 million helping women fight their cases, find hidden assets and maintain their lifestyle. She expects her first payout next year.