Earlier this week, we discussed Balance Point Divorce Funding, a new California company created to loan money to those who are embroiled in a difficult, and expensive, contested divorce. Balance Point is just one area of the growing industry that exists solely to invest in lawsuits. It is estimated that banks, hedge funds, and companies like Balance Point have approximately $1 billion invested in lawsuits across the country at any given time, with a wide variety of claims such as personal injury, property development disputes, and employee whistleblower claims.

While Balance Point does not expressly specify its preferred clientele, they generally fall into a pattern. They are all women who do not have jobs at the time of the split, but who are raising small children. Often, their husbands own and operate small business, which makes financial information more difficult to come by, which, in turn, makes a divorce more time-consuming and costly.

In terms of financial resources, Balance Point focuses on potential clients with marital assets between $2 and $15 million. Napp declines to state the exact percentage of the client's winnings that is kept by Balance Point, but does say that it is "substantially smaller" than the traditional one-third contingency fee of other civil lawsuits. The company has not yet earned any profits, but Napp states that she expects her first client's case to be resolved in a short time.

Although this is not a traditional method for funding a divorce, it has been widely accepted by attorneys and advocates. According to Madeline Marzano-Lesnevish, vice president of divorce attorney ethics organization the American Academy of Matrimonial Lawyers, there is a societal interest in helping people who want to separate but can't afford to. "It furthers the concept of putting both spouses on an equal playing field," she said.

Source: The New York Times, "Taking Sides in a Divorce, Chasing Profit", Binyamin Appelbaum, 4 December 2010