Welcome to another episode of the exEXPERTS Divorce, etc… podcast where we give you all kinds of information and tips on everything divorce. Why? We’ve lived it, so we get it! We’re T.H. & Jessica.
T.H.: Welcome everybody to Divorce, etc… podcast. We are happy to have Nicole Noonan here. She is a family law attorney and the founder of New Chapter Capital. She actually reached out to us. When I heard it was about divorce funding, I didn’t really even understand what that meant. I had to learn more. She’s on the show today to tell us all about it. Welcome to the show.
Nicole: Thank you. Thank you. I love what you guys are doing. I’m very excited to be here.
T.H.: Thank you.
Jessica: Thank you so much. We think that the concept of divorce funding is so original, and we had never heard of it before. But can you start us off with what exactly does that mean? What is it that you guys are doing at New Chapter Capital?
Nicole: Thank you. So we get a lot of that. I get a lot of questions like, what is divorce funding, or I’ve never heard of it. Why has no one done this before? Well, the reality is, I don’t know. I mean, I’ve been doing this for over a decade. I used to practice in an area where I grew up and had lots of people I knew, friends and family, that would come into my office, that all of a sudden came time for divorce, and though they had a nice lifestyle, they had no access to money to pay for an attorney, or get a new apartment, or get the experts that they need. These clients would come in, and we’d either have to turn them away, or we would take them on. Then my firm was carrying the cost of those clients, which doesn’t make for good business. So our accounts receivable were super high, our clients weren’t happy because they weren’t getting the experts, and if you didn’t get interim support, it’s a disaster. I had heard about this in the UK and Australia, and I’m like, this is brilliant. Why don’t we do it over here? An Australian company was coming over, and I said I want to work with you. I’m an attorney. I know lots of attorneys in the area. Cut to today, where I run the largest divorce funding company in the US, and I’m happy to be here.
Jessica: How exactly does it work? Someone comes in and they say to you, I want to get divorced, and I don’t have the money for your legal fees. Lay it out for us what that conversation sounds like?
Nicole: Yeah, so it happens at all different points. Certainly, we do have clients that come in to us saying, I have no idea where to go. You’re my first call. I think the first thing I say to them is, okay, here’s a list of attorneys in your area. Go out and find someone that you feel comfortable with because you’re going to have a relationship with this person. That’s the most important. They have to be represented by an attorney in order to apply.
Jessica: So wait, they don’t have to be using you as their attorney? They could live in a different state, and you could be funding their divorce. Okay, so that’s interesting because I think I was just under the assumption that it was only clients of yours and your firm’s?
Nicole: Yep. No, absolutely not. We do not represent the client. We fund the client. I am an attorney, but I’m not representing all the clients we have throughout the country, because we’re not going to every state.
Jessica: Okay. So they have to get an attorney first, and they have to get an attorney who’s going to–I guess they don’t necessarily have to say to their attorney, I don’t have the money, because you’re going to be potentially supplying the money?
Nicole: Exactly. And a lot of attorneys will say, sure, she’s going to get a million dollars in the house when it sells. Rather than the attorney waiting for that to happen, which is what a lot of firms do, they’ll wait to get paid, they’ll say, okay, why don’t you go to New Chapter Capital? It does come not only from the clients, but also the attorneys will call us and say, I’ve got this client, they put together the retainer, but she’s not, or he’s not going to be able to get to settlement. Can you help them out? That’s when we come in.
Jessica: I mean, so exactly how does it work? Is it they need X amount of money? Is it a percentage of what they’re going to need to pay? I mean, I’m just curious.
T.H.: How do they qualify?
T.H.: Is that what you’re asking? How do they even qualify? Do you take anybody who comes in and says I need money?
Nicole: Unfortunately, we do get clients that come in and are fighting over purely custody, and there’s nothing going to be coming their way in terms of equitable distribution at the end. They’re not going to actually get anything. Those are clients that unfortunately, we’re not able to take on. But the clients typically come through their attorney, and the attorney fills out the application with the client. No two cases are the same. Sometimes it’s a house that’s going to be divided, or mom wants to stay in the house for another two years, and she needs some funding to get her through her divorce, and then potentially for some living expenses at the end. If you remember, we do the funding for legal fees, and expert costs for forensic accountants – that’s another one. People come in, they need those experts, and they’re super expensive – and then for living expenses. Once the application is filled out, the application goes to our underwriters. Our underwriters make a determination pretty quickly. It depends on how many questions they have. Typically, an attorney will know what the underwriters are looking for after I speak with them, or my assistant or the rest of my company speaks with them. Once the client is approved, we do ask the client to review with independent legal counsel. That’s about it. The process can be done in as little as two weeks.
Jessica: What are the underwriters looking for in order to see whether or not someone qualifies?
Nicole: It can be anything. Typically, it’s the house. Certainly, in the tri-state area in New York, and New Jersey, but in Connecticut, and California, things are tied up in real estate oftentimes. Access to that liquidity is very, very difficult because no bank is really going to say sure, you’re going through a divorce? I’d love to lend you a million dollars. It’s not going to happen. Certainly, the monied spouse is not going to let that happen either. They’re not going to sign off so you can go out and have the best attorneys and the best forensic accountants and find those hidden assets. Sometimes if it’s on retirement, we’ve done very strange things, if it’s a farm with horses and whatever. Basically, when there’s going to be a liquidity event at the end of the day, whether or not one spouse is going to keep the house and pay off the other spouse, or the house is going to be sold, or the farm is going to be sold, or the portfolio is going to be distributed, or the IRA is going to be distributed–
Jessica: Or there’s just going to be some kind of maybe a lump sum payout of some sort.
Nicole: Exactly. That’s when we get repaid.
Jessica: Okay, so the lawyers, you said, fill out the application with the client. Are the lawyers the ones estimating to you how much they think the client is going to need? So some may come in and say this person needs $25,000, and someone else may come in and say this person needs $500,000.
Nicole: Yeah, absolutely. There’s no crystal ball. But certainly, an attorney that’s seasoned enough will know is this a $10,000 case, or is this a $10 million case? I mean, we’ve funded cases that are as low as $20,000, and then cases in the millions. It really changes with each matter. Certainly, the attorney will have a grasp, and it may not be to the penny, but certainly, it should be close to what their estimate is.
T.H.: For those divorces that are in the millions, I mean, when you assume that they have the money, are people coming in to you and saying they want the money, when they actually have the money? Then what do you do?
Nicole: A lot of times things are tied up in real estate. If you have everything, a $10 million house, a $2 million beach house, cars, everything is tied up. You have millions and millions of dollars, but you have no access to it. That’s when they come.
We’ve actually funded cases where we’re funding both sides. Even if you are the monied spouse, and you have to pay your other nonmonied spouse’s counsel fees or interim support, we’ve had those clients say, hey, you know what? I can’t liquidate these things right now. It doesn’t make sense to sell the beach house in Bay Head in December when I can sell it in June for X plus 10, or X plus whatever. It would make more sense to come to us. And that’s what happens.
Jessica: It’s not necessarily that they always can’t afford it. It’s just a question whoever it is, is not liquid?
Nicole: Asset rich and cash poor is our typical client.
Jessica: Okay. T.H., were you going to ask a question? Do you guys have a limit in terms of how many cases you’re open to funding per year, per quarter?
Nicole: We don’t have a limit in terms of who we take on and how many we take on. But we don’t take on every case. We do cherry-pick. We talked about before, I do get calls from people that are renting an apartment, have been married six months, they’re 22 years old, and are looking for funding. Those are not our cases. If you have no assets to divide, I certainly don’t think you should spend good money after bad hiring the top attorneys. Work it out with a mediator. Or split a bottle of wine and hash out your non-negotiables, and off on your merry way. We do get those clients every once in a while calling, but those are not people we take on.
Jessica: So you’re using their assets as the equity to secure the loan? Is that right?
Nicole: It’s their likely entitlements. We’re not in a 50/50 state. States like California are 50/50. In all likelihood, it’s going to be divided, as long as they’ve been married over five years, really. But other things are a little variable. New Jersey and New York, they’re equitable distribution states, so it’s not going to be a straight 50/50. That is why underwriting is so important. Our underwriters have been doing this for many, many years, and they really know how to evaluate cases.
Jessica: Are there ever times where you fund divorces expecting a payout of X amount, and then at the end of the day, just based on the circumstances, or whatever the judge rules, that it ends up being significantly less? Then how is that rectified?
Nicole: And knock wood, I’m not going to say lucky, we’ve been smart with–and it’s not me, it’s our underwriters making those determinations on those cases, which ones we take on, and which ones we have to turn away. Certainly, there are cases that are taking much longer than anticipated. But at the same time, a five-year divorce is not unheard of.
Jessica: Who’s funding the funding? Where is the money actually coming from? Is it a bank? Is it venture capitalists?
Nicole: It is investors. We have very wise investors that think this is a unique market. And certainly, they’ve made a nice return. It’s something that I’ve had over the years many people ask me about that. And certainly, I think for investors, it’s a very interesting thing to invest in.
T.H.: Do you ever find that people are taking advantage because they feel like they’re not paying anything right now? They’re carrying my costs, I’m going to get the expert, I want this expert, I want this, I want this, and I want this, which are sometimes not even reasonable requests. But as I know personally, you just need one person to drag you through. If that’s the case, aren’t they also kind of ripping you off? I don’t know how else to say it.
Nicole: Yeah, that’s literally the cases we turn away. If someone is looking for $10,000 a month in legal fees, and then $30,000 a month in living expenses, though that was not the lifestyle they were accustomed to, we’re not a bank that’s just going to bankroll their private chefs and personal trainers all of a sudden, when their lifestyle did not afford them that during the marriage. We have to say this is not a case for us.
T.H.: But if it did afford them that during their marriage, and that was their lifestyle–people switch on a dime. We spoke to a gentleman the other day who only really handles amicable divorces. People drop out as soon as they have to sit down and review who gets what. Things could switch. They could come into you and say, okay, we need this, and we’re going to get along, and we’re going to Kumbaya and all that stuff, and then just one thing, oh, but she did whatever, or he did whatever and switches it. What do you do if you’re halfway through a situation?
Nicole: Well, basically, the way we structure it with the application, the attorney makes a determination of the likely worst-case scenario of what they’re going to need in terms of funding. If a client is being unreasonable at a certain point, I would hope that the attorney would have a conversation. But if we’ve only approved $20,000, and the client’s looking for $2 million, it’s not certainly something that they can come back and say, hey, we’d like another million dollars now and another million dollars next Tuesday. It’s not going to happen. We’ll say that’s not reasonable. That’s not what we agreed to. Luckily, we haven’t had too much of that.
T.H.: Then what about a spouse–so there are two different scenarios, but they might be a bit similar. If they have a business together, the couple, and there’s a bulk of it that’s in cash, but they still come to you for funding. There’s cash, but they can’t prove there’s cash. I know everybody’s going to be very unique, but that’s a big thing I hear about divorce planning – stashing cash, acting “poor” relative to their lifestyle, and crying poverty – and then there’s cash.
Nicole: Right. In terms of us doing evaluations, we do need to look at whether a business evaluation has been done. We’ll do one internally if one hasn’t been completed. Certainly, with an all-cash business, those are very difficult cases. They’re very difficult cases from everyone’s perspective, the clients, the attorneys, forensic accountants, and certainly for our underwriting team. Those cases that if there are other assets, certainly we’ll look at them. But cash, that’s a tricky one.
Jessica: Are there ever times that people come in and they say, okay, they’ve worked with their lawyers, and their lawyer says it’s going to cost $100,000. Then your underwriters analyze the case and say, we’ll lend you $50,000, where they don’t get the full amount of the loan that they’re requesting?
Nicole: We approve in advance less than what they’re requesting. If it’s close, we’ll take them on. But if the underwriter says we will only fund $50,000, and the attorney has said, I think this is a $500,000 case, obviously, there’s a disconnect there. That’s not something we would be able to take on. If it’s close, what we usually do is we fund about 20% of the client’s likely entitlement. If it’s 25%, and it’s a good asset pool–
Jessica: Well, what does that mean? You saying you’re funding 25% of their–what did you say? Of their asset…?
Nicole: Likely entitlements. So at the end of the day, so if it’s a $2 million–
Jessica: Okay, well, let’s use easy round numbers for anyone out there who’s listening. Let’s say that you think that someone’s going to come away from the divorce with $100,000.
Nicole: We’ll fund $20,000, basically.
Jessica: Even if the lawyer says the case is going to cost $100,000, and then after it costs $100,000, they’re still going to walk away with $100,000?
Nicole: That’s a tough one because that one is too close.
Jessica: I feel like there’s how much the attorneys think the divorce is going to cost in legal and expert fees, and then separately, there’s how much money the person’s going to get at the end based on the payoff or what their alimony is going to be and what the house is going to be. Those are two separate numbers, the cost of the actual divorce process, and then what money they’re going to come away with at the end. They’re requesting the funding based on what their attorneys are assuming the process is going to cost. Obviously, part of what you’re interested in is, well, how much you are going to come away with to make sure that they can cover what you have funded in the end.
Nicole: I think this is kind of going back to the other example, where the attorney says this is $100,000 divorce, but we’re only willing to fund $20,000, 20% of her likely entitlement. We won’t fund that. Because if there’s too big of a disconnect, an $80,000 difference, she shouldn’t be spending that much on an attorney, let’s be honest. That’s a conversation that they would have together, but we would say, unfortunately, we’re not able to fund that case.
Jessica: Because you don’t want to fund something where literally every cent that they come out with is going to end up going to you.
Nicole: We want to be a tool for the clients and for the attorneys. I don’t believe in people throwing good money after bad when it comes to divorces. Certainly, it’s not something where you want to fuel the flames. We want to just be another–they can’t go to friends or family. Credit cards are very hard to get, and you’re paying a monthly fee. With us, there’s nothing that needs to be paid until you get to settlement. Honestly, it’s a tool that I think for a lot of people, men and women, which would be useful and helpful.
Jessica: Hugely useful. No, I mean, this is such a fascinating topic to me. Okay, so I come in, I’m a client, and we think I’m going to get $100,000 payoff at the end. Let’s say, you funded $20,000. Am I paying you a percentage? So is that what my “fee” is at the end, that I’ve paid a percentage of what my payout is going to be, regardless of how long the loan is, or anything like that? You’re just taking a piece of whatever my payout is?
Nicole: No, it’s very, very structured. We don’t want any variables. You took out $20,000, you repay the $20,000, hopefully, at settlement, which will be nice and quick because you have the right attorneys, and plus a fee of however long it’s out. If it’s out a year, it’s a certain amount. If it’s out two years, it’s a certain amount. It incentivizes people to settle, because it’s less expensive, certainly, but also gives them tools that they can now have and go out and fund their own case and not worry about their husband, and paying their counsel fees, or friends or family. We’re able to give them that ability to go out and retain those attorneys. But at settlement, that’s when we get repaid.
T.H.: And then how do you guys make money?
Nicole: Because of the fee.
Jessica: That fee. Right, so that fee is almost like an interest payment, for just the purposes of us understanding the concept?
Jessica: Is the fee a flat fee for everybody? Or is it based on a percentage of the loan?
Nicole: It’s a flat fee for everyone. We try to make it–
Jessica: Can we ask what that fee is?
Nicole: It’s 1.58% per month. So it’s similar to a credit card
Jessica: Per month, okay. But aggregated over, so you bring it as a lump sum at the end?
Nicole: So you don’t have to worry about the payments, exactly.
Jessica: So, someone’s listening to this conversation right now, and they’re like, you know what, I totally want to invest in that. I think it is fricking brilliant. How would someone come to you and say we want to be an investor?
Nicole: Oh, we get calls all the time. We’re very well funded, thankfully. But certainly, I’m always happy to take on a conversation, because you never know. I mean, it could be a really good fit for us and for that investor. But certainly, right now, we don’t need it. But I’m happy to always have a conversation.
T.H.: And then how does this work? I mean, it only goes through the attorney. Could I ever just call you directly and say, I’m going through a divorce? I heard about you. Or I have to have my attorney consult with you on my behalf? Do you ever meet with the client?
Nicole: I do meet with clients. However, I would always make sure that they have representation, because ultimately, we’re litigation funders. So if there are no lawyers, then we’re funding individuals. We’re not going to fund someone pro se or that is acting for themselves in court.
T.H.: Right, so that’s really, really important. Can you say that again, what you’re not going to fund? Because there are a lot of people, especially women, who feel like they’ve no money, they don’t know how to defend themselves, and they’re going to listen to this and say, I’m calling Nicole.
Nicole: Right. Listen, I applaud those women that do that and represent themselves. However, it’s not someone we can fund. We do not fund people that do not have legal representation.
T.H.: Right. Okay. That makes sense.
Jessica: Yeah, totally. I mean, I just think that, again, I’m fascinated by the whole concept. I think that it’s a hugely necessary resource for so many people out there. It’s so genius. I don’t know how we’ve never even heard of it before.
T.H.: No, but I feel like you might want to invest in it. It’s exEXPERTS and New Chapter Capital.
Jessica: I don’t know if this is a good analogy or not, so correct me if I’m wrong, but again, I just want to make sure everybody who’s listening really understands exactly the concept so that they know whether or not they’re potentially a good candidate for it, or whether or not they know someone who is a good candidate. We all know people who feel they’re stuck in marriages, and they can’t get out solely because of the finances, because they can’t afford the divorce. Is it analogous to having a personal injury case where it’s like, I don’t know, you’re suing whoever, some company, and they’re just taking a percentage of what you get at the end? Is that a good way for people to understand it, or no?
Nicole: No, because it’s, I mean, yeah–
Jessica: Because a personal injury attorney, theoretically, is self-funding your case.
Nicole: Right, right. No, it’s not quite the same. Because at the end of the day, those personal injury attorneys, or those funders that are doing those sorts of personal injury loans, are taking a very large percentage. Our clients are very different. We’re not those personal injury attorneys where what they take on sometimes is nuts. Certainly, there’s a risk-reward. They have a higher risk and higher reward. Ours are–
Jessica: Fairly low risk.
Nicole: There’s a risk, certainly, I mean, but at the end of the day, we want to make sure that the client is comfortable with what they’re going to have to repay. That’s very much spelled out on all our documents, saying how much they’ll need. And listen, we hope that they get the biggest settlements, what they’re entitled to, and certainly, not something too piggish, but something they’re entitled to at the end of the day, the right settlement for them. That’s when we get repaid. That’s really what we’re here to do.
T.H.: Are you limited to which states you’re in?
Nicole: No, we’ve been in–oh, gosh, I mean, pretty much–we haven’t done Alaska or Hawaii, and I’m always willing to travel to Hawaii if we need to, but we’re at New York and New Jersey, Connecticut, Florida, Massachusetts, Texas, California, Oregon, Iowa.
Jessica: Where are you based?
Nicole: In New York.
Jessica: In the city?
Nicole: We’re based in the city.
Jessica: Okay. Okay. I mean, I feel like I sound like a broken record. I just think the whole concept is so interesting.
T.H.: I know. I told you when she emailed us, I was like, we have to talk about divorce funding–
Jessica: It’s so interesting. I love the fact that we’re able to help spread the word about it. Because, I mean, here for us at exEXPERTS, it’s literally all about letting people know what kind of resources are available for them going through this terrible time in their lives. I think that what you guys are doing is absolutely amazing.
T.H.: Right. People can advocate for themselves and go to their lawyer and say, I heard about New Chapter Capital. I don’t want to sell the house prematurely. Now’s not the right time. I want you to go reach out to them and find out if we can work together. Don’t just look for a lawyer who already has a relationship with them, but advocate for your lawyer to start a relationship with them.
Jessica: Alright, excellent. Well, thank you so much, Nicole, for your time and for doing what you’re doing. Honestly, I bet there are a lot of people out there who feel like you guys literally are a lifesaver and a lifeline during this time of emotional trauma and dealing with all of this. We really appreciate it. For anybody out there listening, go to our website at www.exexperts.com, and you’ll find Nicole’s personal expert page on our website. It’ll have all of her contact information, and all the information on New Chapter Capital, so you and your lawyer can reach out directly and see whether or not this is a good fit for you.
T.H.: And you’ll see Nicole around exEXPERTS again. We’re definitely doing another one.
Jessica: For sure. For sure. Thanks, Nicole.
T.H.: Thanks Nicole so much.
Nicole: Thank you all so much. Take care. Bye
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