Surplus Fund State Statutes

Summary of State Statute on Surplus Funds (Foreclosure Sales)

Surplus funds refer to the excess money remaining after a foreclosure sale, once all debts, liens, and legal costs have been paid. Most state statutes outline a specific legal process for handling these funds to ensure proper distribution.

Key points commonly found in such statutes:

Definition:
Surplus funds are the proceeds left after satisfying the outstanding mortgage, taxes, and any court-approved costs related to a foreclosure.

Entitlement:
The former property owner (borrower) is usually the primary party entitled to claim surplus funds. However, junior lienholders (e.g., second mortgages, judgment creditors) may also have claims, depending on their priority and whether they filed notices.

Notification:
The court or foreclosure trustee must typically notify all interested parties (the previous homeowner and lienholders) about the existence of surplus funds and how to claim them.

Time Limits:
There is often a statutory deadline (e.g., 6 months to 1 year) to file a claim. After this period, unclaimed funds may escheat to the state (i.e., become state property).

Claim Process:
Eligible parties must file a motion or petition with the court, supported by documentation proving their claim to the funds.

Court Determination:
If multiple claims exist, the court will review and determine priority before ordering disbursement.

Protection Against Fraud:
Many states include provisions to guard against fraudulent claims, requiring detailed documentation and sometimes a hearing.

Here is a list of some state statutes that exist in states where surplus funds can legally be claimed in the U.S: