Legal Costs – The Options

Legal costs in family cases can range from hundreds of pounds in straightforward cases to many thousands of pounds in more complex or acrimonious cases. Ultimately those legal costs, whatever the amount, have to be paid out of the parties own income or assets. I often tell clients that a case with two identical facts will often have two different outcomes and therefore two different levels of legal fees. So much depends on the expectations and personalities involved resulting in one case being extremely amicable and agreed quickly and another couple at war ending up with a judge made decision about their children or finances.

Concerns about legal fees are one of the main reasons people decide to represent themselves. This can be short sighted as often failure to get good legal advice and acting on that advice can cost a client dearly in the short and long term. The concerns about how to fund legal fees should be weighed against the benefit to be obtained both monetary and non monetary. Having been involved in litigation myself I know how stressful it is and how getting good legal advice before and during your matter is essential to both your health/wellbeing and to resolving a dispute.

I set out below the sources of funding for legal fees

1. Soft Loans from Family and Friends

These loans are often made interest free with no fixed date for repayment. There are issues to consider before agreeing to accept such a soft loan. A loan is usually included as a liability in the division of assets on divorce but if the loan is a “soft” one ie from friends or family, it is often treated as a gift by the Courts or to be repaid in the longer term rather than immediately as a commercial loan would be. I have known many cases over the years where there has been a dispute as to whether the loan will ever actually be repaid, and this in itself can incur furher legal fees. It may be prudent to have a loan agreement drawn up signed by the borrower and lender to show it is a proper repayable loan and not merely a gift.

2. Bank accounts, savings and investments

Many people pay their legal fees through existing funds and savings. Advice from a financial adviser should be sought as to which invesments to cash in, to ensure that tax liabilities are minimised.

3. Remortgage of Property

If the property is jointly owed by your spouse/partner you will need their consent to obtaining funds to finance legal fees and this consent may not be forthcoming, unless it is to fund both your legal costs. Assuming there is sufficient equity in the property to raise capital then the loan can last beyond the duration of the legal fees and the interest rate should be modest at least in the current economic climate. However, remortgage finance may not be available where there is insufficient equity in the property.

4. Personal Bank Loans

Each bank, particularly High Street ones, have their own eligibility criteria as to whether they will provide loans for legal fees. Their availability is usually dependant upon your ability to repay from income or capital. Sometimes it is possible to have interest rolled up until the debt is repaid.

5. Loan Finance from Other Institutions

Loan finance can be available from third party organisations who provide litigation funding but it is likely security by way of a charge over property will be required. Before entering into any agreement it is important to take independant legal and financial advice.

6. Credit cards

For some this is the only way to afford legal fees. However, if the balance cannot be cleared on a monthly basis this could be an expensive way of funding. Rates of 0% can be obtained for some credits cards and if you have the time and inclination to shop around and move your balances you may be able to pay for your legal costs without interest providing you keep an eye on when the rate reverts to a commercial one and your case does not last too long.

7. Maintenance Orders

It is sometimes possible to obtain assistance from your spouse/partner for your legal fees. It can often help both parties if they both have access to funds to meet their legal fees and obtain good and proper legal advice to assist them in resolving matters together. However, sometimes the party with control of the funds (income or capital) will use them to pay their own legal fees, but deny the other access to those funds in a tactical way to try and force a poor settlement.

An application for interim maintenanance can be made to obtain regular payments from the other party to fund ongoing and future legal costs but before an application can be made you must first apply for external funding and only when this is refused can you proceed with an application to the court. If funding is refused an application for maintenance to include legal fees can be made and if the Court is satisfied the other party can afford to contribute it will make an order for interim maintenance sufficient to cover the assesed monthly legal fees. The Court Order could provide for a substantial monthly income payment, backdated to cover all legal fees and include the costs of the application itself.

Ultimately legal fees for both parties have to be paid out of the one matrimonial “pot”. Funds may be borrowed but they usually need to be repaid and this can have a serious impact on future finances including sadly in some cases on funds being available to rehouse both parties. Trying to resolve matters by agreement with legal advice is the best way to keep your legal fees to a minimum.

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