Bergmann Law LLC

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I Want My Kids To Have The Best Start Possible

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Right? Who doesn’t? Well, Debbie Downer is back with some stories of parents who helped their kids get a start in the world by co-signing student loans, mortgages or otherwise becoming financially obligated for their kids’ debts.  Picture this: your daughter has the wedding of her dreams and after a year of wedded bliss in an apartment, they decide it’s time to become first-time home buyers.  How exciting! Soon you’ll have grand-kids playing in the big back yard just waiting for grandpa and grandma to visit!

House hunting, the kids fall short of the lending requirements for that dream house and it looks like the dream of home ownership is about to go up in flames.

But wait! The lender asks if anyone can co-sign for the kids and you are only too happy to help.  Several years go by, and right on target arrive grandchild #1, the #2.  Life is good and you and your wife are looking at another 10 years until retirement.  You decide to downsize.  There’s not a lot of equity in your home, but getting rid of the debt and into a smaller, less expensive property is a high priority, so you do some home shopping of your own.

This is where Debbie Downer enters the picture.  Your lender runs your credit and sees your obligation on your daughter’s home as well.  This new debt/income ratio leaves you unable to even downsize.  WHAT! HOW CAN THAT BE?

So you ask your daughter and son-in-law to refinance and take you off the mortgage.  Well, guess what (don’t forget about Debbie’s role in this story please) – during that conversation the kids break the news that divorce is filed and your son-in-law recently quit paying the mortgage.  It’s not hit your credit report yet, but it won’t be long now.

What to do?

If you could do it again follow the famously coined advice of Nancy Regan and “just say no.” It’s not tough love – it’s reality.  If the kids do not qualify for the mortgage in the first place, that means they cannot afford it.  Go smaller, less expensive or remain a tenant until circumstances change.

How about those student loans? If you sign on the dotted line, the interest rate is better and as we all know, the kids will have to pay back any student loan obligation because there is no way out of it.  Right?  So with your signature (encouragement, love, blood, sweat and tears) your kid gets through 4 years of undergraduate, and 4 years of graduate school leaving with an advanced degree and the prospect of a long and lucrative career.  He also graduates owing Uncle Sam about $200,000 dollars, but that six figure salary easily offsets the monthly obligation.

Wait a minute…Debbie is back and WHAM…right after graduation your son is tragically killed.  As if losing your son is not enough, what do you think happens to those loans?

You guessed it – Uncle Sam will be knocking on your door looking for that $200,000.  Now there are ways to mitigate Debbie’s horrible scenario, such as getting a term life insurance policy in an amount to cover the loan in the event the unthinkable happens.  But remember,  that life insurance policy, although a great idea to cover the most tragic of circumstances, does not help if your kid can’t find a job, or runs into financial trouble down the road.

What can we at Bergmann & Good do to guide you through these daily financial decisions? Lending and credit obligations are our specialty.  Give us a call before you sign.  If you own a business, there may be even more creative ways to offer your kids the best, while protecting your nest egg for retirement. Call us first and hopefully you’ll never have to meet Debbie Downer.

Buying or Selling a House in New Jersey? Well Read On….

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Bergmann & Good believes a lawyer by your side through the process of buying or selling property is always in your best interest. Having an attorney present at the closing table helps the process go faster and smoother and offers you protection and assistance if something goes wrong. Your real estate agent may be the best in the business, but a Realtor cannot offer legal advice, interpret contract provisions or offer the legal implications of any exception a title company may reserve in your title policy.  Only a lawyer can do that. But if you are still not convinced, read on…

In October, some major changes at both the state and federal level have been implemented.  The Consumer Financial Protection Bureau (CFPB) has taken over administration of the Real Estate Settlement Procedures Act (RESPA) from the Department of Housing and Urban Development (HUD). Not only does this mean new forms, contracts but it also means new rules and regulations surrounding waiting times and mandatory legal review periods.

And if that is not enough, the New Jersey standard contract has also been overhauled.  While the intent may have been to make things easier, that is not always the outcome.  For instance, if you are a Seller, the new contract may leave you open to lots of repair requests or as some Buyers like to say “a second bite at the apple” in negotiating purchase price.  If you have a buyer and think you are susceptible to them “taking a second bite” talk with us.  Maybe the standard form contract is not in your best interest, and having an attorney draft your agreement will save you time and hassle on your way to the closing table.

While it will take time for everyone to get comfortable with the new processes, rule and forms, now more than ever it is important to consider having strong representation with you at closing. It’s a brave new world in real estate- give Bergmann & Good a call before you start your journey!

I Hate Google

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Not really.  In fact, I love Google.  It’s the starting point for most of my own questions like: “What is The Weather Next Week in Madrid?” or “Top Netflix Movies During a Snowstorm.”  You know, life’s big questions.  However, these questions are much different than utilizing Google as your legal counsel.  Time and time again I have to break the news to clients that the form agreement or contract they found on Google, which they then incorporated into their business and executed actually has a jurisdiction clause for another state, or actually gives away specific rights you thought you were protecting.

My favorite story is being presented with a real estate contract, which had deteriorated to a dispute, by an investor looking for assistance.  The investor had saved a few bucks and pulled the form from Google.  Under this form contract, the law applied to any dispute was that of the Republic of Seychelles.  Because I do not practice law in this beautiful and beachy place, I couldn’t help with this particular dispute, but we did agree that going forward, she would discuss the contract prior to execution rather than just when a deal has fallen to pieces.

Another example is a client who had formed his LLC online, “Googled” for an Operating Agreement, everybody signed and the business was off and running.  Until a dispute erupts.  A nasty one.  The Operating Agreement, which is typically (and unfortunately) not looked at again until the partners are at odds, required that all disputes be settled by AAA Arbitration, with three arbitrators.

Sounds reasonable, right?

Well, even a minor dispute require a large filing fee and when your agreement requires not one, not two, but three arbitrators you are paying upwards of $400/hour, times three, plus your attorney.  So if your dispute is over, say $10,000 there is no simple and inexpensive way to resolve it.  In practical terms, it means even the most minor dispute is likely the end of your company.

Having gone through this very problem with a client recently, her reaction was:

“I hate Google!”

So the moral of the story is, just because you can find what you think you need online, doesn’t mean that you should.  Taking legal shortcuts often lead to unintended and unwanted litigation, or a lawsuit costing thousands of dollars.  If the goal is to save money by consulting Google instead of a business lawyer, you are also typically assuming unintended risk.

The internet is a remarkable tool and Google has the answers to almost anything at your fingertips, but some things should not simply be left to the current algorithm of Google results for questions most important to running your business.  Leave Google for answering life’s big questions and feel free to get sidetracked with a cat waterskiing while your attorney drafts the necessary document to protect your business properly.