Dec192025
Surplus Funds Q&A Series

How do I claim my share of surplus funds from a foreclosure when there are multiple co-owners? – North Carolina

Short Answer

In North Carolina, surplus funds from a foreclosure sale usually get paid to the Clerk of Superior Court when the trustee is not sure who should receive them, including situations with multiple co-owners. A co-owner can file a special proceeding with the clerk to have the court determine who is entitled to the surplus and in what amounts. The filing must name other known claimants (such as the other co-owners), and if a factual dispute develops, the case can move to Superior Court for a trial.

Understanding the Problem

When a property is foreclosed in North Carolina and the sale brings in more money than what is paid for the foreclosure costs, taxes, and the debt, surplus funds can remain. The main question becomes: when there are multiple adult co-owners on title, how can one co-owner claim a fractional share of that surplus when the other co-owners may also have rights and may be hard to contact? This question typically turns on where the surplus is being held and what process the Clerk of Superior Court uses to decide who gets paid.

Apply the Law

North Carolina’s foreclosure statutes set an order for paying sale proceeds and direct what happens to any surplus. If the trustee (or other person conducting the sale) cannot confidently pay the surplus to the right person or people—because there are multiple possible recipients or adverse claims—the trustee can pay the surplus into the office of the Clerk of Superior Court in the county where the sale occurred. A person claiming any part of that money can then start a special proceeding before the clerk to determine ownership and distribution. If someone files an answer that creates a real dispute of fact about who owns what share, the matter can be transferred from the clerk to the Superior Court civil docket for trial.

Key Requirements

  • A real “surplus” exists and is being held by the clerk: The claim process described here applies when the foreclosure sale produced extra funds after required payments and the surplus was paid into the Clerk of Superior Court’s office because the trustee could not safely distribute it.
  • A filed claim that asks the court to decide ownership: The co-owner seeking payment generally needs to file a special proceeding requesting a determination of who is entitled to the surplus and in what amounts.
  • All other known claimants must be included: Other people who have filed claims, or who are known (or reasonably believed) to claim an interest—often including other record co-owners—must be named as defendants so the clerk can resolve competing rights in one case.

What the Statutes Say

Analysis

Apply the Rule to the Facts: Here, the property had multiple adult co-owners and surplus funds remain after the foreclosure sale, so the trustee may have paid the surplus into the Clerk of Superior Court’s office because there is more than one possible recipient. If the co-owners’ names appear in the foreclosure file and/or the land records, North Carolina procedure generally expects them to be included as parties in the special proceeding so the clerk can decide distribution. The lack of contact information does not necessarily prevent a claim, but it often affects how notice/service must be handled and whether the case becomes contested.

Process & Timing

  1. Who files: Any person claiming all or part of the surplus (for example, one co-owner). Where: Office of the Clerk of Superior Court in the county where the foreclosure sale was held. What: A petition to start a special proceeding to determine ownership/distribution of foreclosure surplus funds under North Carolina law, naming other known claimants as defendants. When: After the surplus has been paid into the clerk’s office (often because the trustee is in doubt as to entitlement).
  2. Serve the other claimants: The petitioner must have the other named parties served with the petition and any hearing notice using an approved service method. If addresses are unknown, the case may require documented efforts to locate them and alternate service steps allowed by North Carolina procedure and local practice.
  3. Clerk decision or transfer for trial: If the matter is uncontested or only requires document review (for example, the deed and foreclosure file show clear fractional ownership and no one disputes it), the clerk can decide distribution and direct payment. If a defendant files an answer that raises factual disputes (for example, disagreement about ownership percentages or claims that a co-owner assigned rights), the matter can transfer to the Superior Court civil issue docket for trial, which usually extends the timeline.

Exceptions & Pitfalls

  • Not all “co-owners” necessarily share equally: The deed controls the form of ownership and percentages if stated; if the deed is silent on percentages, disputes can arise and may require a judge to resolve.
  • Other claims can come ahead of owners: Even when an owner expects a share, liens, taxes, assessments, and allowed foreclosure expenses are paid first, and disputes can arise over what was properly paid before a “surplus” exists.
  • Missing parties and service problems: Failing to name a known co-owner (or failing to properly serve them) can delay the case or force it to be re-filed. When addresses are unknown, the record (foreclosure file and land records) often becomes the starting point for identifying and locating parties.
  • Contested facts trigger a different track: If a co-owner claims a different ownership share or raises a factual issue, the matter may transfer to Superior Court for trial, and the clerk may require a bond for costs in that situation.
  • Attorney’s fees can be addressed by the court: North Carolina law allows the court, in its discretion, to award a reasonable attorney’s fee to the prevailing side to be paid from the disputed funds, and it can tax costs against losing claimants who asserted claims.

Conclusion

In North Carolina, when foreclosure surplus funds exist and the trustee cannot safely pay them to the correct people—often because there are multiple co-owners—the surplus is typically paid into the Clerk of Superior Court’s office. A co-owner can claim a fractional share by filing a special proceeding with the clerk, naming other known claimants (including co-owners), and completing proper service. If someone disputes the ownership facts, the matter can transfer to Superior Court. Next step: file the special proceeding with the Clerk of Superior Court in the county where the foreclosure sale was held.

Talk to a Surplus Funds Attorney

If there are surplus funds from a North Carolina foreclosure sale and multiple co-owners may have competing rights, an attorney can help identify the correct file, list the necessary parties, and move the special proceeding forward without avoidable service delays. Call us today at (919) 341-7055.

Disclaimer: This article provides general information about North Carolina law based on the single question stated above. It is not legal advice for your specific situation and does not create an attorney-client relationship. Laws, procedures, and local practice can change and may vary by county. If you have a deadline, act promptly and speak with a licensed North Carolina attorney.

Category: Surplus Funds Q&A Series

Author: jpierce

Attorney Jared Pierce is the founder of Pierce Law Group in Raleigh, North Carolina, a firm he established with a dedicated focus on probate administration and estate planning across North Carolina. Born and raised in the Republic of South Africa, Jared moved to Durham with his family in 2001, bringing with him a rich cultural background and a distinctive accent that often serves as a conversation starter.