Detailed Answer
When a foreclosure sale in North Carolina brings in more money than the amount owed on the mortgage, the extra funds are called surplus funds. Under North Carolina law, anyone with a valid claim to those surplus funds can petition the court for payment. The key steps and deadlines are outlined in N.C. Gen. Stat. § 45-21.35 and § 45-21.37.
Here is how the process typically works:
- Foreclosing party’s request: Within 30 days of the foreclosure sale, the lender or trustee who handled the sale files a motion in the clerk’s office of the superior court. This motion asks the clerk to hold any surplus funds.
- Clerk’s notice: Once the clerk receives the request, they must advertise in a newspaper in the county where the property sits. This notice runs once a week for three consecutive weeks. The notice invites anyone with a claim against the surplus to come forward.
- Filing your petition: If you believe you are entitled to all or part of the surplus—perhaps because you held a second mortgage, a judgment lien, or other valid claim—you must file a written petition with the clerk. File your petition no later than 30 days after the first newspaper notice appears. Provide proof of your claim, such as loan documents or court judgments.
- Serving interested parties: Serve a copy of your petition on the foreclosing party (lender or trustee) and any other known claimants. Proper service usually means delivering copies according to civil procedure rules.
- Hearing before the clerk: The clerk schedules a hearing to review all petitions and objections. At that hearing, the clerk decides who has valid claims and in what order they rank. Second mortgages generally rank behind the foreclosed mortgage but ahead of judgment liens.
- Distribution of funds: After the hearing, the clerk issues an order directing the registry to distribute the surplus according to the clerk’s findings. You receive payment once the clerk signs and enters that order in the court record.
Missing the 30-day deadlines can bar your claim forever. If multiple claimants exist, the clerk follows the priority rules under North Carolina law to decide how to allocate the money.
Quick-Reference Checklist
- Confirm a surplus exists at the foreclosure sale.
- Watch for the clerk’s newspaper notice and note the publication date.
- Prepare and file your petition within 30 days of the first notice.
- Include clear proof of your lien or debt.
- Serve copies on the lender/trustee and other claimants.
- Attend the clerk’s hearing and present your evidence.
- Obtain the clerk’s order and collect your funds.
If you find this process confusing or worry about strict deadlines, let us help. Pierce Law Group’s attorneys guide you through every step. Contact us today to protect your rights and recover surplus funds after a foreclosure sale.
Email: intake@piercelaw.com
Phone: (919) 341-7055
