Loans From Family and Friends to Pay
Attorney Fees For Your Divorce
Unfortunately for those who love or care about you, often the only source
of funds to hire or keep a family law attorney involved in your case are
friends, co-workers, significant others, and parents or other family members.
It is exquisitely painful and humiliating to be forced to borrow from
these folks. Yet without their financial aid you may be lost.
Often these cash advances can be recovered from the other spouse by one
of the mechanisms described here, and so they will be repaid without jeopardizing your ability to conclude
your family law matter.
However, there are a few tips you should know:
- Have your helpers pay the attorney directly- whether by credit card or check. Whenever someone loans or gives you money to help with fees or living expenses, if you deposit those monies directly into your bank account even if you next write a check to your lawyer, the other party will argue that you have undisclosed income or resources and may wave your bank statements in front of the court. This forces you to explain the transactions and the source of these funds. You always want to be in a position of needing to explain as little as possible. But, the attorney should make a written disclosure to them and to you that they only represent you!
- Ask them to keep a record of those payments-- in the form of canceled checks or the credit card statement. You may want to introduce these as evidence later. Take control of evidence you might need now.
- Sign a promissory note at the time you receive the money-- and keep a copy; better yet, have it sent to the other party's attorney as a "sua sponte" (spontaneous) augmentation of your Preliminary Declaration of Disclosure - no one will later challenge it, and you've just proven you take your fiduciary duties to update your circumstances to the other party seriously. Frequently parents of children in divorce are pre-distributing your inheritance to you in the sense that if they never ask for the money back, they nonetheless are poorer for what they gave you. There is always a suspicion that these "loans" are disguised gifts. If a Court believes that your parents are funding your side of the litigation, it may affect the Court's willingness to order the other party to contribute. The attitude of most lawyers and judges is that a loan is not a loan unless some written agreement memorializes it as such.
- Make repayment on these loans-- even if it is interest-only or small amounts. Not only do most people fail to sign a promissory note, they rarely think to create a record that these funds were being repaid. Obviously you cannot repay it all until you receive an attorney fee award or your case resolves - but demonstrating some effort to treat the insider loan as you would any other creditor is persuasive evidence that the monies you received were in fact loans and not gifts. Regular gifts begin to smell like income.
Thurman Arnold, III, C.F.L.S.