Answering the Big Divorce Question: How Are You Going to Pay For It? With Nicole Noonan of New Chapter Capital

Episode Transcript

Pete Wright: Welcome to How to Split a Toaster, a divorce podcast about saving your relationships from TruStory FM. Today, "What you do when you’re worried your toaster is going to go broke."

Seth Nelson: Welcome to the show, everyone. I am Seth Nelson, and I’m here, as always, with my good friend, Pete Wright. Today on the show, we’re talking on one of the big divorce questions. It comes right along with, "Where am I going to live? What am I going to do with my life?" It’s the question of money. Nicole Noonan is the founder and CEO of New Chapter Capital, and her specialty is divorce finance. That’s right. Today, we’re going to help you answer the question, "How will I fund my divorce?" Now, personally, I think the question should be, "How am I going to pay for these goddam lawyers?" But Nicole, what do you think?

Nicole Noonan: Well, it’s not just the lawyers. It’s the other experts, as well as living expenses. Right now, it’s hard to get into court, as it always is. And to get those interim living expenses is not always so easy.

Seth Nelson: Wait a minute.

Pete Wright: Okay. That’s a really good question.

Seth Nelson: Right. Jump in, Pete.

Pete Wright: That’s huge for me, because in the time we’ve been doing this podcast, I talked to friends and family in the Zoom dinner party circuit, and those who are in and around the divorce process, their first thing is, "Oh, divorce is too expensive." People who are still living together, and are still married, but not married because they cannot afford their own divorce. Now you’re talking about something that hits home for a lot of people. It’s not just the attorneys, and there is so much uncertainty about what else that means. We know that there are a lot of things you have to consider, not just attorneys, but putting food on the table over the course of however long this thing is going to draw out. What do we need to think about?

Nicole Noonan: No, absolutely. Most of the time clients are divorcing, they have one main asset, that’s usually the house. The idea of moving out and splitting that up is a scary one. How are they going to afford to buy a new home or to rent until the divorce is final, and while the houses is pending sale? So what we do is, we make an advance for those clients for their, first and foremost legal fees, because we want to make sure that the job is done, and they’re able to get through to the divorce, and expert costs, but also for those living expenses. It doesn’t have to be just housing, it could also be… Whether it’s tuition for school, if one spouse is not willing to pay for private schooling, but the other one wants it. We’ve done that. It’s for a lot of people, a safeguard that they wouldn’t have access to, otherwise. If they don’t have friends or family to go to, and can’t take out a credit card, what do you do?

Seth Nelson: So let’s frame this a little bit, Pete, because I’m so excited to have this conversation. I kind of jumped right in.

Pete Wright: I know you’ve got all [inaudible 00:03:22]. You went all Tommy boy on me.

Seth Nelson: Here’s the problem from my viewpoint that I think Nicole is fixing, usually in a divorce, you’re going to have one of the following scenarios. One person is controlling the funds, and it’s not a quick, fast, easy solution to get into court, to get the judge to require that person to open up the checkbook in any meaningful way. And we can unpack that, but is that the general topic of one potential issue that you deal with, Nicole?

Nicole Noonan: Absolutely. Every day. I saw it in my own practice where a person wouldn’t be able to get on with their lives, because the other spouse wasn’t coming forward, and making that interim relief possible for them. Absolutely, that’s definitely one scenario.

Seth Nelson: And another potential scenario, and Nicole, feel free to disagree with me. Pete does it all the time. I’m used to it, we’re good. Another one is, neither party necessarily has the funds to support the other or even themselves, if they move out of the house, because when you have two incomes in one house and nothing else changes, except now there’s two incomes in two houses, standard of living must drop, assuming you haven’t been saving. Maybe their big asset is the house, that ultimately they agree has to be sold, and we’re all in agreement on that. But, in the meantime, how do we get from where we are now to setting up separate lives, and being able to pay the bills, and try to maintain a standard of living that is similar? Maybe not everything, but similar to what we had, and especially, making sure that our kids have what we perceive they need, or just the standard that they’ve typically grown accustomed to, is that a second scenario?

Nicole Noonan: Absolutely. You hit the nail on the head there. Our clients are asset rich and cash poor. We’ve actually funded clients where major real-estate holding, one big house that’s been featured in lots of magazines, but it’s all tied up in that house. So, we actually funded both sides. While the sale of the house was pending, and they’re showing it around and whatnot, they were able to go off and live their new best lives separately, and not have to be tied to that house.

Seth Nelson: Just to be clear, when we talk about your clients, that’s different than talking about my clients?

Pete Wright: I want to clear that up because… Can you talk just briefly about the relationship about, Nicole, how your business works and the relationship you have with attorneys?

Nicole Noonan: I am an attorney, and I used to practice. I used to do what you guys do. It’s a tough, tough game, but when we work with a client, we make sure that they have representation first and foremost, because the application must be completed by the law firm. Not necessarily a partner or an associate, can be finished by a paralegal, but it must come from the firm itself. And what our relationship with the attorneys and the firm is, we need updates, what’s going on in the case quarterly. Has someone settled? Has someone switched attorneys? God forbid, something terrible happened? We need to know, in terms of that, but nothing like the little mundane every day motion practice. We don’t really care about that, but it’s really has to do more with the big settlement offers. Once the client comes to us, the client is your client and our client, but in a different capacity. We don’t actually represent them in court.

Pete Wright: And so, you don’t work at all with the attorneys. That’s the thing I want to make clear. So if people are listening, there’s like, "Oh, maybe I could do this. I should ask my attorney for a recommendation. Or maybe they’ll hook me up." They come to you directly, the client comes to you directly?

Nicole Noonan: No, it can come through the attorney, it can come through their forensic accountant. They do have to be represented by counsel in order to apply.

Seth Nelson: So, here’s what I think is happening. Let’s give examples, Pete.

Pete Wright: Yeah, yeah.

Seth Nelson: I’m their lawyer. I’m representing the wife in this case. And she says, "Seth, I think you’re a great lawyer. I want to retain you. We are house [inaudible 00:07:56]. All of our money is tied up in this house. I don’t have any money to pay for your retainer fee. I don’t have any money to support myself unless my husband pays, I don’t think he’s going to. I don’t have an IRA or a 401k that I can borrow against, that’s in my name alone. Everything we have is either joint and he can stop it, or it’s all in his name. And I know you’re telling me that at the end, I’m going to get a half of everything, but now I have nothing. How do I pay for you?" And then I get to say, "Well, there’s two ways. I’m going to keep doing my work. And I’m going to get to a temporary relief hearing. That’s going to be three to six months down the road. I hope that the judge is going to rule in our favor, and have him start opening up the checkbook. And in that I’m going to ask for temporary attorney’s fees, and for back attorney’s fees for what we’ve done to get there. And that’s another way to open up a checkbook." "There’s a second way, and they’re not mutually exclusive, we can do both. But a second way is, I know Nicole Noonan who will give you a loan. And there’s certain requirements that Nicole will have about that loan. How much, how often financing? It’s my understanding that Nicole does not require you to make monthly payments until you get some sort of settlement, but you have to check with Nicole, and you’re going to have to give her permission for me because everything we talk about, it’s attorney-client privilege, me to give her updates on the status of your case. "Not the daily, what Nicole will call motion practice, like, ‘They didn’t give us the documents.’ I have to file a motion for contempt or a motion to…’ Not that. Like, ‘Hey, are there any settlement offers? Are there any updates on financials? Has there been any big changes in anyone’s job status or attorney status?’ Big things in your case that might change Nicole’s view on the quality of this loan. But let’s talk to Nicole and ask her." How did we do Nicole?

Nicole Noonan: Not bad, not bad at all. Absolutely. In your first scenario as a lawyer, we often carry the case, sometimes to settlement, because we couldn’t get that judge to ask to get that checkbook open for the other side to pay us. And so it’s not great business for attorneys. In your second scenario, certainly, while you could still do the first and make the motion for counsel fees, let’s do it at the end as well. But-

Seth Nelson: Correct,

Nicole Noonan: … We certainly see that every day where we’ll make an advance for your clients so the client can be referred by you. The client can come to us if she has any questions, we certainly have brochures with people at my office that can answer any specific questions that she has. Would then send the application to the firm. We try to make it as simple as possible, because we know it’s a really stressful time for the clients. We try to simplify this portion of it as much as we can.

Pete Wright: Okay. That makes a lot more sense. And so, when you’re working with a client, Nicole, are you in any way giving them guidance or financial counseling along the way, that’s not your business?

Nicole Noonan: No, we do not do financial planning for our clients. Certainly, we’re happy to give referrals for people. We’re also, sometimes, a client’s first phone call if they’re looking for attorneys. I’ve been doing this a long time, so we do know the best of the best of attorneys, and we give them a list of people, but we do not give legal advice. So, when they come to us, they’re coming for funding, for their loss of their litigation. That’s it.

Seth Nelson: They’re looking for a loan.

Nicole Noonan: They’re looking for a funding. Yes.

Pete Wright: How does your business, Divorce Capital, differ from going to a bank, and asking for the process… Is the bank likely to help support people too? Is there competition there?

Seth Nelson: Let’s be very clear. We mean going to a bank asking for a loan, not carrying any armed guns or anything.

Nicole Noonan: Right. No masks.

Pete Wright: But, you’re an attorney.

Seth Nelson: I know, but you get up today, a little dark. I don’t know what you’re doing after the show. Just had me worried. Okay?

Pete Wright: Okay. Okay. So, going for a traditional loan, what’s the difference, if I’m thinking about looking for support?

Nicole Noonan: Not always easy to refinance during a divorce. Banks don’t usually like to see that on an application form. Also, if you’re the moneyed spouse, do you really want to sign off to refinance the house so your non-moneyed spouse can get funding for the divorce so they could fight you? Probably not. So, it’s not always that easy to go in, and get money from a bank unless you do something, maybe illegal. I’m not going to talk about that.

Pete Wright: I’m telling you guys, attorneys are the worst. I’m trying to have an above-board conversation here. You’re always taking it… Okay.

Seth Nelson: Above board when you’re packing. I get ya. No problem, Pete. Okay. Here’s the thing though, to really think about, about going to a bank, and I’m going to take this just one more step that people don’t think about, because we’re talking about financing. Is, sometimes in a settlement, one party, it doesn’t matter which one, is going to get the house, but both parties are on the note in the mortgage. The party who’s no longer going to be living in the house or owning the house, wants their name off that note and mortgage. I hate to sound like a lawyer, Pete. I apologize, but I want to be clear about this. The note, generally speaking is the document you sign with the bank that says they’ll lend you money and that you owe them money. The mortgage is how it gets paid back. That’s why you foreclose on a mortgage. You’ll have both those documents. Your spouse who no longer is going to be your spouse, who’s no longer going to be owner of the property is certainly not going to want to have a piece of property that they do not own, but they still owe money to the bank and they still have the mortgage. So, when you’re going for lending for that, the bank might want to see six months of alimony payments you receive, or six months of your income before they’ll allow you to refinance on your income alone. None of this stuff with these banks are fast and loose, and get it done quick.

Pete Wright: And they all, it sounds like have this sort of templated set of expectations that do not take divorce into consideration.

Seth Nelson: And those are the people, correct me if I’m wrong, Nicole, are behind the curtain. And they’re called the underwriters.

Nicole Noonan: Yup.

Pete Wright: Ah, that was scary. Just made it sound so scary.

Seth Nelson: No. It could be undertakers.

Nicole Noonan: [crosstalk 00:15:12].

Pete Wright: Cue the dirge music. Nicole, How do you look at somebody coming to you? I assume you aren’t just throwing money at people. What things do you take into consideration when you’re going into a relationship with somebody?

Nicole Noonan: I have to say, we do have our own underwriting team. But we-

Seth Nelson: I knew it.

Pete Wright: And they work-

Nicole Noonan: They work in a cave.

Pete Wright: … They work in a cave and it’s lit by candelabra.

Nicole Noonan: Exactly, exactly.

Pete Wright: And they all wear like monks hoods.

Nicole Noonan: They chant.

Pete Wright: … Yeah. All notes are signed in-

Nicole Noonan: Blood.

Pete Wright: … blood of foul.

Nicole Noonan: Exactly. First and foremost, we-

Pete Wright: I hope they don’t ever listen to this show.

Nicole Noonan: [crosstalk 00:15:53].

Pete Wright: Don’t send this to your underwriters.

Nicole Noonan: The first and foremost is the application that we have done by the firm. We do a credit check. But, we get it, a lot of our clients do not have great credit history, whether they just haven’t built it up or their own, or they were always the secondary signing of a credit card, and they depended on their spouses. I want to say husbands, but spouses. We then do our underwriting usually within three business days. The other benefit of using funding is, it’s expedited. It’s not… Bank could take months, and months, and months to make a decision. Unlike a credit card, you don’t have to make any monthly payments, so funding is really a very good option for certain clients. So we, like I said, fund for legal fees, expert cost, and for the living expenses, so it’s-

Seth Nelson: When you’re looking at whether to fund or not, here’s what I’m imagining, is that I have a client that comes in, needs the funding. And I said, "Okay, we have to do in Florida, check your local jurisdiction." As we always say, Pete, their financial affidavit. Which is a sworn statement that says, "Here’s my income, here’s what taxes get taken out. Here’s my net income, here are all my expenses." And this is the part that you’re going to want to really know about, I think, Nicole, "Here are my assets and debts." Once you start getting that information, that is where you’re really going to make your decision. It’s fairly easy for you to verify those assets and debts, because if there’s a house, check the public records, you get the deed, you get the note, you get the mortgage, you know how much equity is in the house. If you have a retirement account, you want to look at the statement. But it’s fairly quick, if you’re doing this in three to four days, that you’re not asking for a mountain of documents.

Nicole Noonan: I’m doing it a long time, so we know what’s the… Passes a smell test, and what doesn’t. But, in terms of clients themselves, we do get calls all the time from people that have no assets, that want to divide the furniture, or worse, their pets. And we don’t fund those cases, unless I can end up with a very cute little Maltese dog or something at the end, we’re not funding those type of cases. But, there has to be an asset there. And yes, we do verify, but a lot of times we’ll get calls from attorneys or forensic accountants saying, "Hey, I have this client, can I run this by you?" And then we’ll, again, do a little smell test. And I’ll say, "Well, I’ve seen this scenario before, something similar in our underwriters have approved it." Or I’ll say, "Don’t bother." I’m pretty frank with people when it comes to that.

Pete Wright: Okay, let’s talk a little bit about risk. And not risk on your part, but risk on somebody taking a loan from you. Let’s say you fund their living expenses, and projected attorney’s fees, and it’s all based on what you thought the way the case was going to settle. And it doesn’t. Maybe it ends up not settling the way you thought it would. They end up on the hook, I imagine, for potentially more than they were able to take out. What happens in that case?

Nicole Noonan: That’s bad underwriting. That’s when I go down to the tunnels and find the underwriters and say, "How did you let this slip through the cracks?" But, no we don’t find a hundred percent of what the client would be entitled to.

Pete Wright: That’s your risk calculation?

Nicole Noonan: That’s our risk calculation. And, like I said-

Seth Nelson: Which, ultimately though ultimately protects the client.

Nicole Noonan: Right, absolutely.

Pete Wright: Yeah. Well, that’s what I’m asking. How is the client protected?

Seth Nelson: Because if they need a $100,000, and I’m making these numbers up, and Nicole’s saying, "We’re willing to fund you 20 grand, because we think that’s what you need to get from point A to point B. And let’s see where we go from there." Then that client is only running a 20% risk that they’re going to be holding the ball, not a 100% risk if things don’t work out. You don’t want to put a divorcee in that position, when they get through it all, and now they have this other whole mountain of debt.

Nicole Noonan: That’s exactly, exactly it. I’ll say this, too, what we’re doing, we’re funding. It’s a non-recourse cash advance against their settlement.

Pete Wright: Well, those are sound like just made up word.

Nicole Noonan: It does sound like made up words. It does, but it’s not.

Pete Wright: Okay, we’re going to need [crosstalk 00:20:28].

Nicole Noonan: Basically, if she ends up with nothing, we end up with nothing, and that’s bad underwriting. That’s how other funding companies that try to do this have lost their shirts, because they didn’t have the proper underwriters reviewing their clients. What I say, non-recourse cash advance, it’s an advanced against their potential settlement. If they end up with nothing and we approved it, then we take nothing. But, our underwriters are pretty good.

Seth Nelson: So, one, does the lawyer matter?

Nicole Noonan: Comes down to our underwriters. We do check the lawyer. We do not want someone who’s fresh out of law school, practicing criminal law for six months, decided to change, and now took on a family law case, and wants a $1000,000 funding line. Not going to happen. Certainly, we have attorneys that we’ve worked with for over a decade and those are a good list, and then we’re happy to work with new attorneys as well. We’re always welcoming in that, but we do review, certainly, if someone’s been suspended or something. We don’t really love to work with those attorneys.

Seth Nelson: Right. And as the money [crosstalk 00:21:48]. The bar says you can’t practice.

Nicole Noonan: [crosstalk 00:21:51].

Pete Wright: We don’t love to work with them.

Seth Nelson: Does the money flow through the lawyer’s trust account or does it go directly to what would be the person you’re lending the money to?

Nicole Noonan: The money goes through the firm.

Pete Wright: Oh, well that’s smart.

Seth Nelson: Well, as a lawyer, you know I’m loving that.

Pete Wright: Yeah, right. Our first kid is going to do her second year of college, and this is financial aid.

Nicole Noonan: More or less.

Pete Wright: Goes to the college. College first, not straight to the kiddo.

Seth Nelson: You’re not giving a 19 year old a bunch of money to say, "Oh, don’t forget to pay your tuition fees."

Pete Wright: Yeah, exactly. Exactly right. Also, they can’t hold sharp objects and then… The list is long and not so [crosstalk 00:22:39].

Seth Nelson: Don’t run with scissors. Right, we know.

Pete Wright: Of course. My question is about the pandemic, because we started talking about that with things that have changed over the last 18 months. I’m wondering if your lending profile has had to change and adapt accordingly. If people are coming to you and saying, "Hey, I need help. And my living expenses now need to be increased by 50% or 75%, because we can’t get a court date." Does that play into both your funding decisions and, to Seth, your calculation of what you’re asking for in a settlement? I don’t know who wants to go first it’s a jump ball.

Nicole Noonan: Yeah, no, absolutely. We’ve seen this, certainly an increase in calls. Some people have to turn away, because they did, sadly [inaudible 00:23:26], so much during the pandemic, we’re not able to accept some of the clients. But we do anticipate, we know that these cases are going to take if it was one act, it’s now two acts, maybe three acts to get into court right now. Certainly, Florida and New York, New Jersey, at states, it was backed up before, it’s not helping with the pandemic in getting court dates. So, it is something we factor in.

Seth Nelson: And that leads me to my question was, do you lend in all 50 states?

Nicole Noonan: We are across the country. Certainly, we’ve funded in most states, east coast, west coast, and a number of places in Midwest. We get calls all the time to fund in Canada. Unfortunately, we’re not able to be up there just yet, but we are across the country.

Pete Wright: Seth, you didn’t answer that question. Does the pandemic change to your settlement calculus?

Seth Nelson: No. Not from a legal perspective. In all cases, whether it’s pandemic or other external forces on my clients, there’s always external pressures to settle a case, I just want to be done.

Pete Wright: Okay.

Seth Nelson: I want my life back. I’m tired of going through this process. So there’s always those external. In other areas of law where you can’t get into court… We’ve been very fortunate in Hillsborough county. The court system has remained open. We’ve switched stuff to Zoom. I’ve done full Zoom trials. Which is a unique skill in and of itself. But, other areas of law where you need a jury, such as slip and fall cases, what I’m hearing, and I don’t have any statistics on this, is a lot of the insurance companies are not settling in cases, because they know it’s going to be a long time before you get into court in front of a jury. A lot of the personal injury lawyers that you see those ads for, they might be getting cases coming in, but they’re not settling, because there’s no pressure to settle if there’s no deadline. And there’s no deadline if you can’t get into court. The judicial system, I would argue rightfully so, is handling the criminal cases first that need a jury trial and have been waiting, as opposed to a civil matter, where it’s a dispute, ultimately over money, not over someone’s constitutional rights for liberty.

Pete Wright: Fascinating. Thank you for that. Again, setting expectations, who else is involved? Is a forensic accountant always involved in the process on your side, Nicole?

Nicole Noonan: No, not necessarily. We do get people that are able to fund their own litigation, they’re able to pay their own personal living expenses, but they need some experts, and forensic accountants are expensive. Sometimes it makes a difference that they find there’s a hidden asset, or a business evaluation that a spouse is saying, "Well, this business is worth nothing." And it turns out it’s a multimillion dollar company.

Seth Nelson: That never happens. Come on.

Nicole Noonan: Never, never.

Seth Nelson: Every business divorce I’ve been in, they just open up their books, "Come on in, do an audit." You know?

Nicole Noonan: Yes, yeah. Especially a cash business. So, so honest about it all the time, 100%. For our clients, it does make a difference.

Seth Nelson: Pete, you have not gotten to the best part. In fact, I will tell you, I’m a little disappointed in you.

Pete Wright: What? In me?

Seth Nelson: Yeah, in you.

Pete Wright: How do you judge me when you know I keep the best for last?

Seth Nelson: Oh, fair point, fair point. I stand corrected.

Pete Wright: I am here to build drama, and narrative over the course of a long and dignified arc. And that leads us to the most important question of the day. How did you end up with the moniker, fairy godmother of divorce?

Nicole Noonan: Yes, it is an honor that I try to live up to every day. It was bestowed upon me by the New York Post a number of years ago. And it’s stuck and I-

Seth Nelson: And it just rolls off the tongue, too-

Nicole Noonan: It just rolls off the tongue.

Seth Nelson: … fairy godmother of divorce.

Nicole Noonan: Every family event, every high school, college reunions I walk in, they no longer call me Nicole Noonan, they call me the fairy godmother of divorce.

Seth Nelson: So lucky.

Nicole Noonan: [crosstalk 00:28:16]-

Pete Wright: [crosstalk 00:28:16] yourself, like entering rooms in a high falsetto, "Nicole is here." That’s what I want to see.

Nicole Noonan: Absolutely. Absolutely.

Seth Nelson: But, it’s so much better to bring it back to me as I always do, Pete, than short Jewish bald lawyer. We’re a dime a dozen.

Pete Wright: I was just going to ask.

Seth Nelson: We’re a dime a dozen. In fact, I’m so proud if you Google short Jewish bald lawyer, I come up first. I love it. And Nicole gets fairy godmother of divorce. It’s so nice.

Pete Wright: It is fantastic. Although I have to say, to be completely fair Seth, you’re joking. And I know this because I just Googled short Jewish bald lawyer and the image results are fantastic.

Seth Nelson: I’ve never done it. I’m not afraid.

Pete Wright: You should be. Yes, All right. Well, hey, this is fantastic. Nicole, help us point people in the right direction if they want to learn more about your work. Where should they go?

Nicole Noonan: Sure. Visit our website, ww.newchaptercapital.com. And that’s N-E-W-C-H-A-P-T-E-R-C-A-P-I-T-A-L.com. Or give us a call (212)404-7807.

Pete Wright: [crosstalk 00:29:36].

Seth Nelson: And I love the name too. I love the name, "New-"

Pete Wright: I know.

Nicole Noonan: Thank you.

Pete Wright: It’s awesome. It really is what people are [crosstalk 00:29:44].

Nicole Noonan: Thank you, guys, so much.

Pete Wright: No, it is. It’s a real pleasure having you here. Thank you for sharing your wisdom and experience with us, and our audience, Nicole. We sure appreciate it. As always, on behalf of short Jewish bald lawyer, Seth Nelson, and the fairy godmother divorce, Nicole Noonan, I’m Pete Wright. We’ll catch you next time right here on How to Split a Toaster, a divorce podcast about saving your relationships.

Speaker 5: Seth Nelson is an attorney with Nelson Koster Family Law and Mediation, with offices in Tampa, Florida. While we may be discussing family law topics, How to Split a Toaster is not intended to, nor is it providing legal advice. Every situation is different. If you have specific questions regarding your situation, please seek your own legal counsel with an attorney licensed to practice law in your jurisdiction. Pete Wright is not an attorney or employee of Nelson Koster. Seth Nelson is licensed to practice law in Florida.