Getting a Loan against cash in a trust. -? ?

mikeesik · 05-30-2012, 06:31 PM

Hello.

I'm curious if I'm able to get a loan against money, i.e a house sale that the cash is in a trust account.
Reason that the cash is in a trust is that I am going through a Divorce.

My x is dragging her a$$ to be a pain to settle in any way.

The house was sold for a bit less than $500000 and was paid off.
There is a significant amount of cash coming towards me as I am entitled to 75% of the purchase price , due to having the house paid for by yours truly prior to marriage

I am not working due to a car accident and money is tight. I am on disability through an insurance plan.

I am asking you people if it is possible to get a Loan against this money in the Law Society trust account.?
My atty is aware of what I'm trying to accomplish and it is perfectly legal.

Does anyone have knowledge and experience in this and can recommend an agency ?

MRM · 05-30-2012, 07:29 PM

Oh yes. I know all about it. It is just this side of legal and completely wrong. The problem is that there is no secondary market for the paper you sell to the investors, so their investment is pretty illiquid. Since there isn't a liquid secondary market to trade on freely that would value your loan fairly, the investors are able to take advantage of the inneficiencies in the market and rape you. In this interest rate environment you would normally borrow at maybe a 3-5% rate and loan back to the bank at about a .5% rate. But the legalized loan sharks that will take your trust fund as security will give you a discout rate that will equal a loan that has about a 20% interest rate compounded anually. You cannot do worse for an investment than this, including borrowing from the mafia. I know. I've done the research.

Essentially the people that will loan you money against your trust will structure a deal where you don't really borrow the money. What you'll really do is receive a lump sum of money today, and in return they receive your right to receive the trust fund payments in the future. Say you're entitled to $100,000 three years from now. A normal discount rate would pay you maybe $93,000 today in exchange for your right to receive the $100,000 three years from now. The people you're talking about will offer you $30,000 today and wait three years to take your $100,000.

Take out an unsecured loan from your bank or credit union and pay their version of usurious interest rates, hock your car, sell blood, spend your vacation as a mercenary in Biafra,or do anyhing else to raise the money you need. But do whatever you need to do to not borrow against your expected trust fund or sell your expected income to the legalized loan sharks who will gladly take it off your hands.

Hugh R · 05-30-2012, 08:03 PM

Listen to MRM!

Dottore · 05-30-2012, 09:45 PM

Talk to your banker. If the money is really in a Law Society trust account and you are entitled to much of it, your bank may loan you some money against those funds at a reasonable rate.

I've had several clients over the years borrow against proceeds of legal settlements tied up in lawyers trust accounts without difficulty.

kaisen · 05-31-2012, 06:01 AM

JG Wentworth 877-CASH-NOW

(I saw it on the Jerry Springer show!)

dienstuhr · dienstuhr's Garage

I think that the OP means that the funds are in a lawyer's trust account under a trust condition that they not be disbursed until full and final settlement is reached in the divorce action. The Law Society is a self-governing body for lawyers and AFAIK does not maintain a trust account.

Probably doesn't change the advice (go to Bank or Credit Union and offer an assignment of your share in the trust $$ as collateral for the loan) but just in the interest of clarity...

Cheers

d.

MRM · 05-31-2012, 10:58 AM

Dottore is correct, as always. If the money really is in the Law Society Trust, you should just shop around with local banks to see if you can get a loan to tide you over. Make sure that the loan term is twice as long as the longest you think you might have to wait until you get the money. You don't want to be caught a year from now without access to the money that's in trust and facing a note that's coming due plus interest.

JG Wentworth is one of the many companies that want to finance structured settlement, buy anuities, ect. They tend to pay a higher rate than some of the other thieves out there, but they will rape you. They will not want to loan you the money. They will want you to sign over the right to the money that's being held in trust, and in exchange they'll give you a lump sum of money right now.

For instance, if you have $350,000 in a trust account today, and you expect to receive 100% of those funds one year from today, they'll finance your loan by giving you $200,000 today, but they'll keep the entire $350,000 next year when the trust distributes the funds. You'll effectively borrow $200,000 and pay $150,000 in interest. That's a round figure on the kind of discount rate they'll want to give you. If anything, I'm overestimating what they'll give you.

If you went to the bank or borrowed unsecured from someone who specializes in distressed lending, you might pay 5% or just under $20,000 in interest to borrow the money for a year.

If it's such a sure thing, borrow the money from your lawyer. It's ethical for lawyers to advance funds to a client but the lawyer can't engage in a business enterprise with you.