Financial Cost of Divorce: Comparing Mediation, Litigation and Collaboration

Background on divorce process models: Mediation, Collaboration and Litigation

Friends of mine recently concluded a fairly amicable divorce.  This middle class couple opted for a collaborative divorce. In collaborative divorce, to quote collaborativedivorce.net:

The parties and their lawyers enter into a “Participation Agreement” where it is agreed that if a settlement is not reached, the lawyers will withdraw from the process and not participate in the ensuing litigation. It is understood by all involved that the lawyers’ retainers are limited to settlement negotiations.

On the adversarialness scale, collaborative divorce is generally perceived as somewhere between mediation (perceived as the least adversarial divorce process involving a third party) and litigation (perceived as the most adversarial). Litigation is the traditional model – where each spouse retains their own lawyer. (Uncontested do-it-yourself divorce may be the least adversarial yet.)

Costs of Collaboration, Litigation and Mediation Compared

My friend’s collaborative -and reasonably friendly- divorce cost the couple $40,000. How is this so? Attorneys (like mediators) typically charge by the hour. In New York’s Capital District, a rate of $300 per hour for matrimonial practitioners is not uncommon. Some attorneys charge more, some less. Each collaborated session involved the spouses’ attorneys and an attorney for the child – about $900 an hour for each session. Forty-four hours later (or some 133 total hours billed), the divorce was wrapped up. If this couple’s children had no attorney, the resulting bill at $600 an hour (two attorneys at $300 per hour each) would have been nearly $27,000. Still a consequential sum for this decidedly middle class family that was now living in two households instead of one.

The litigation model in the Capital District not uncommonly involves each attorney requiring an upfront payment, or retainer, somewhere in the vicinity of $3,000-5,000 each. It is impossible to know beforehand whether a litigated approach will cost more or less than the collaborative approach. And it is true that a monied spouse may be helping the non-monied spouse with the payment of attorney fees while the divorce process unfolds. It is not unreasonable to consider, however, that there is still one large pie (the sum of each spouse’s income) that the two new households will need to share. Regardless of who is spending the money, it is money spent by the couple. It is probably safe to assume that a litigated divorce will generate attorney fees in the vicinity of those described above. If the litigated divorce consists of much jockeying for position and negotiating through the lawyers, and certainly if a divorce actually ends up in court at trial, 100 billable hours spent in the aggregate by the two spouse’s attorneys is not a stretch. (Don’t get me wrong. I absolutely endorse the notion that professionals should receive reasonable compensation for reasonable time spent on a client’s behalf.)

Contrast now the costs of the collaborative and litigated models with the costs of mediation. Like attorneys, mediators will typically charge by the hour, not unusually in two-hour blocks. A typical mediation may take two to four mediation sessions. Mediators commonly charge the couple at the time of mediation at the mediator’s going hourly rate. (Our mediation fees are described here.) Mediators who are attorneys may be able to draft the necessary divorce documents after a successful mediation, or the couple may turn to other lawyers to draft or review divorce papers including a settlement agreement, after the mediator drafts a memorandum of understanding. Some couples may prepare the papers themselves. In either case, one sees how the financial costs of the divorce process can be substantially contained through mediation.

Mediation, when appropriate, can be cost effective for many couples.

Mediation is not for everyone. It doubtfully would work for very contentious couples, or where abuse is an issue. For those couples for whom it works, it can be a cost effective approach, permitting the couple after divorce to put the money saved to use in the critical task of creating two households from one.

Follow the link for more on the potential cost effectiveness of divorce mediation.