12/18/2010 03:29 pm ET Updated May 25, 2011

The Divorce Investor

Stacey Napp understands the ugly side of divorce--which is often the side that involves money. In fact, she understands it so well that in 2008 she started a business, Balance Point Divorce Funding, which invests in divorce and probate litigation, helping clients cover costs in exchange for a share of the winnings.

Napp started Balance Point, based in Beverly Hills, California, after her own 13-year marriage fell apart in 2001. Napp was going to settle for $500,000 and the house, but when she discovered her husband was about to sell his business for nearly $6 million, she thought again.

Family members and friends pitched in to help her with the legal costs. Seven years and countless court appearances later, Napp prevailed, and used some of the proceeds to help start Balance Point. The company lends clients the money to pay for lawyers' fees, hire investigators to search for a spouse's hidden assets, and maintain a "reasonable" lifestyle ("If you are accustomed to vacationing in Maui every winter, power to you, but not this winter," she says).

Napp currently has ten clients and expects her first case to be resolved soon.

KH: Why do you think businesses like yours haven't sprung up earlier?

SN: Ours is really a unique business, which I suspect has a fair amount of pushback from investors for three reasons. First, litigation is far from the bricks and mortar investment of, say, real estate, where people can see what they are investing in. And a lot of potential investors don't understand divorce litigation, so they shy away from it.

Second, we are talking about divorce and probate litigation and I think there can be an uneasiness about treading in these waters.

Third, this is a relationship-intensive business. The amount and level of support needed by clients requires an involvement with the personal dynamics of each case. To do it right, you have to help your clients manage the myriad issues they will encounter and increase their chances of coming out whole at the end of the process. Because I've been through this process and know what support is needed and how important it is, the support is an integral piece of Balance Point's business model. Most investment firms treat investments as fungible -- put their money up and move on. We embrace a format that includes the management component.

KH: Is it true that all Balance Point's clients are women? Why is that?

SN: Yes, to date. It's also true that I am determined to change this. We have looked at cases from prospective male clients, but each case has had some insurmountable sticking point such as an ironclad pre-nuptial agreement. But we've been receiving new inquiries from prospective male clients, which we are currently seeking to underwrite.

Perhaps the more critical question is this: for a company that offers its services to the financial underdog in a marriage regardless of race, religion or gender, why do mostly women -- and not men -- seek out our services? I believe the answer to this question is fairly simple and it has to do with the dynamics of the earnings of husbands and wives. No big surprise here: men are typically the primary breadwinner spouse. As such, the husband has control of the income flow and the major assets of the marital community or family. Therefore, when a marriage goes south, it is usually the husband who is financially in control and the wife who gets cut off from both income and assets if the primary breadwinner is inclined to engage in gamesmanship over the finances. Ergo, it is usually the women who seek us out.

KH: So essentially, what your services do is level the financial playing field, right?

SN: From a financial perspective you are correct. However, we have found that our services really are more than simply writing a check. In reality, part of our services entail being able to read and help the client navigate through what is unfamiliar and frightening terrain to them, yet simply the page from a well-worn playbook to us.

KH: You say 'well-worn playbook.' Have you had any clients so far whose situation has surprised even you?

Not clients, but cases that have come to us yes, definitely. Just when you think it can't get any worse, it does. The common thread that runs through these cases is the despicable manner in which the in-spouse treats the out spouse (the "out" spouse is the one with the significantly lower income). And I have news for you, the women who are in the in-spouse position and are inclined, are just as out of control as their male counterparts.

KH: What's an example of a despicable display?

SN: Despicable can take many forms. To me, hands down the worst is when the children are caught in a tug of war between the parents, often because one or both of the parents bad mouth the other spouse to the children. We also see again and again a scenario where people build a life together, have children together and then when the marriage comes to an end the spouse with the income or assets financially washes their hands of their former spouse and their own children, claiming newfound poverty.

Lastly, despicable are the spouses who for no reason other than sport use their superior financial resources to "break" the other spouse. Years ago in Ron Perlman's infamous divorce from Patricia Duff, the following comment was attributed to him in the NY press: "I will destroy you, and I will enjoy it." True or not in Mr. Perlman's case, we have seen this sentiment at play over and over again.

KH: Are there any humorous moments, even if it's dark humor?

SN: Every once in a while you hear a story that, amidst all the pain and suffering and bad behavior prevalent in divorce, makes you laugh. Here's one: A husband and wife were headed into a divorce. They had a nice house on the side of a mountain, substantial assets but not living high on the hog by any means. The husband worked, wife was a stay-at-home mom to their two small children. I am told that there was a drinking issue with the husband and so one day while he was at work, the wife decided to avoid a confrontation with her husband (which she feared could turn nasty) and pack up the kids and move out.

The wife somehow knew she should expect that the first several months apart would be rough financially and that she should expect no funds from her husband. In that spirit as she packed up her van, she threw into boxes and bags every food item she could find that would save her from spending money. Into the bags went all the kids' clothes. Into more bags went the contents of the pantry and refrigerator. On her last trip back into the house, while the kids waited in the van in the driveway, she found a whole turkey in the freezer. It didn't matter that it wasn't Thanksgiving, this could feed them for a week. And so, having run out of bags, she grabbed the 20 pound bird and headed out the door. But she tripped and dropped the turkey. The turkey of course, dropped on her foot and broke it, then proceeded to slide down the driveway and down the side the mountain. I heard this story years ago and and it still tops all for a moment of levity in a business that showcases so much heartache. I call this story, "Give 'em the bird".

This is the start of a regular column in this spot. I hope you'll share your own stories, questions -- and, of course, your viewpoint -- via comments or email (