Detailed Answer

When a foreclosure sale produces more money than the total debt and costs, North Carolina law allows former owners or junior lienholders to claim the surplus. These claims proceed as a special proceeding under Article 16 of Chapter 45 of the North Carolina General Statutes. You must follow specific steps to recover your funds and ask the court to award attorney fees.

1. Determine Eligibility and Amount of Surplus

After the foreclosure sale, the clerk calculates how much remains once the mortgage balance, accrued interest, foreclosure costs, and senior liens clear. If funds remain, the clerk holds them in escrow for distribution according to N.C. Gen. Stat. § 45-21.37.

2. Prepare and File a Verified Petition

File a petition titled “In the Matter of Foreclosure Surplus Funds” in the clerk’s office of the county where the sale occurred. Your petition must:

• Identify the foreclosure sale date, property description, and clerk’s file number.
• State the amount of surplus funds held.
• Name all parties of interest (former owner, junior lienholders, the foreclosure purchaser, et al.) as respondents.
• Include an itemized statement of your attorney fees and costs, if you request them.

3. Provide Notice to Interested Parties

Serve each respondent with the petition and a summons. Use the method set out in Rule 4 of the North Carolina Rules of Civil Procedure. If a respondent’s address is unknown, publish notice once a week for three consecutive weeks in a newspaper of general circulation in that county, per Rule 4(j).

4. Attend the Hearing

The court schedules a hearing within 60 days after the petition’s filing. At the hearing, present evidence supporting your claim, such as:

• The clerk’s certificate showing the surplus amount.
• Deeds, payoff statements, or judgments reflecting your interest.
• A detailed affidavit of attorney fees and costs.

The court evaluates each claimant’s interest and determines how to distribute the surplus.

5. Recover Funds and Attorney Fees

Under N.C. Gen. Stat. § 45-21.37(b), the court may allow and award reasonable attorney fees and costs as part of the distribution. To increase your chances of receiving fees, you should:

• Request fees clearly in your petition.
• Provide billing records that justify the hours and rates claimed.
• Show that your efforts directly produced the recoverable surplus.

6. Obtain the Court’s Order

After the hearing, the court issues an order directing the clerk to pay each claimant and counsel the awarded sums. The clerk then disburses funds accordingly.

Recovering foreclosure surplus funds and attorney fees requires careful adherence to North Carolina’s special proceeding rules. Consulting an experienced probate attorney can help you navigate the petition, notice, and hearing phases efficiently.

Key Takeaways

• Surplus funds arise when a foreclosure sale exceeds outstanding debt and costs.
• File a verified petition under N.C. Gen. Stat. § 45-21.37 in the county of sale.
• Serve all parties of interest using Rule 4 methods; publish if necessary.
• Request attorney fees in your petition and support them with detailed billing records.
• Attend the hearing within 60 days to present evidence of your claim and fees.
• The court orders distribution of both surplus funds and any awarded attorney fees.