How to Petition for Surplus Funds after a Foreclosure Sale in North Carolina
Detailed Answer
When a lender forecloses on real property in North Carolina and the sale brings in more money than the total debt owed, the extra proceeds—called surplus funds—belong to parties with higher priority claims. You can petition the Clerk of Superior Court in the county where the sale occurred to recover those funds. Here’s how:
1. Confirm the Existence of Surplus Funds
After the sale, the Clerk’s office issues an account of sale and an order of distribution. These documents show the sale price, the amount applied to the mortgage, costs, and any surplus. You can request a copy from the Clerk.
2. Identify Your Priority
Pursuant to North Carolina General Statutes §45-21.35 (ncleg.gov/GS_45-21.35), the Clerk distributes sale proceeds first to costs, then to the foreclosing lien, and then to junior lienholders. If you held a prior lien, mortgage, or other recorded claim and the sale generated surplus, you qualify to petition for those funds.
3. Prepare and File Your Petition
Under N.C.G.S. §45-21.36 (ncleg.gov/GS_45-21.36), any party in interest may file a Petition for Distribution of Surplus Funds within one year after the foreclosure sale. Your petition should include:
- The case caption and file number of the foreclosure proceeding.
- Your name, address, and relation to the title or lien.
- A statement of the surplus amount you seek.
- A copy of the Clerk’s account of sale and order of distribution.
- Any documents proving your lien or claim (e.g., recorded deed of trust).
- A clear request that the Clerk transfer the surplus funds to you.
File the petition and pay the statutory filing fee at the Clerk’s office in the county where the sale occurred.
4. Serve Notice on Interested Parties
Once you file, the Clerk sets a hearing date. You must serve notice of the petition and hearing on all parties listed in the order of distribution—typically the foreclosing lender and junior lienholders. Follow the service methods laid out in N.C.G.S. §45-21.36 to ensure proper notice.
5. Attend the Hearing and Obtain an Order
At the hearing, present your proof of entitlement. If the Clerk finds you have a valid prior claim, the Clerk issues an order under N.C.G.S. §45-21.37 (ncleg.gov/GS_45-21.37) directing disbursement. The Clerk then releases the surplus funds to you.
Key Steps at a Glance
- Obtain the account of sale and order of distribution from the Clerk’s office.
- Verify you hold a superior lien or recorded claim.
- Draft a Petition for Distribution of Surplus Funds under N.C.G.S. §45-21.36.
- File the petition and pay required fees with the Clerk of Superior Court.
- Serve notice on all parties listed in the order of distribution.
- Attend the Clerk’s hearing and present evidence of your claim.
- Receive the Clerk’s order directing payment and collect your surplus funds.
Contact Pierce Law Group for Help
Recovering surplus funds after a foreclosure sale involves strict time limits and precise procedures. Pierce Law Group has experienced attorneys ready to guide you through each step. To discuss your case, contact us today by email at intake@piercelaw.com or by phone at (919) 341-7055. Let us help you secure the funds you’re entitled to.
