Divorce can bring financial and emotional heartache - and it can be devastating. For Connecticut housewife Margaret Spenlinhauer, the turmoil lasted 18 year - time she spent searching for proof that her ex-husband had hidden big money from her before they divorced. Spenlinhauer ultimately got a marital settlement of $15 million, a far cry from the original agreement of $1.75 million. Forensic accountants and the right lawyers - and the money to hire them - might have helped Spenlinhauer find the evidence and get her money a lot faster.

Enter Balance Point Divorce Funding of Beverly Hills, Calif. The company advances divorcing spouses money to pay household expenses, lawyers, forensic accountants and other professionals. In return, the firm takes a share of the larger settlements its clients hope to win.

THE INDUSTRY

Litigation funders have a reputation for taking as much as 60% of a client's eventual settlement. That's enough to make anyone leery of the entire industry. However, divorce funders have been less aggressive, and financial planners say that they may be a potential tool for clients - albeit one of last resort.

Laura Gilman, president of LGA Financial in Los Angeles, says when large sums are at stake, she can foresee recommending divorce funding to a client whose spouse is hiding assets, has illiquid or offshore assets or owns a business with very subjective values. "The reward could be significant," she says.

But the numbers must make sense, since the costs will come out of any divorce settlement. "Anyone who is considering this needs a lawyer who is not a divorce attorney to look at it as a contract," says Karen Altfest, executive vice president of client relations at New York-based Altfest Personal Wealth Management.

Lawsuit lenders have as much as $1 billion invested in lawsuits, according to industry estimates reported in December 2010 in The New York Times. Hedge funds and banks have gotten into the act, at first funding personal injury cases but eventually expanding to investors' claims of securities fraud and other kinds of disputes where one party is much shorter on cash. A handful of companies in England and Australia fund divorce cases, offering loans.

In the U.S., the divorce funding industry is very new. Balance Point opened four years ago. Founder Stacey Napp says her charge is "always less than a lawyer's contingency fee," which is typically a third of a settlement.

A client who receives nothing - an unlikely possibility - also owes nothing. "If they don't do well, we don't do well," Napp says. Balance Point expects to resolve its first client settlement this summer.

Balance Point has one U.S. competitor: BBL Churchill Group. Headed by Brendan Lyle, who co-founded a large divorce funding firm in Australia, Churchill began lending late last year from its New York headquarters, charging interest between 14% and 18%.

BALANCE POINT

Napp began Balance Point Funding with money from her own contentious divorce settlement, litigation she paid for with loans from family and friends. "That lead to my 'Aha!' moment," she says. "If I hadn't had those resources, I would have received a diminished percentage of what I was entitled to."

She began signing clients about a year and a half ago; so far the company has helped 16 of them navigate contentious, high-stakes divorces. Balance Point clients typically have already borrowed money from family, friends and credit cards. "They're realizing, 'I'm out of every penny I can beg, borrow or steal and I'm no further along,' " Napp says. "We don't hear from people who are living in $10 million homes and still going to the country club. We get the people who are deciding between groceries and putting gas in the car."

One woman who received a house after she and her husband first separated had drawn down on her equity to pay her living expenses and fund legal fees, and had run out of money. With Balance Point's help, Napp says, she can pay a litigation team - commercial lawyer, family lawyer, fraud examiner/forensic accountant, as well as an expert in the husband's professional field.

Another client alleges that her husband physically abused her and had substance abuse problems. So far, the client says, her ex-husband has ignored court-ordered support and thumbed his nose at discovery efforts. In that case, Napp says, the legal team hopes to ensure that support already awarded is actually paid.

The typical divorce funding client is a woman with a marital asset pool of between $4 million and $5 million that she can't tap for expenses. The assets are often tied up in a business that the husband controls.