Probate Q&A Series

Detailed Answer

When a property in North Carolina sells at a foreclosure auction for more than the total debt secured by the deed of trust, those excess proceeds become “surplus funds.” Under N.C.G.S. § 45-21.36, the clerk of superior court must hold these funds and attempt to notify the former owner. If the former owner does not claim them within the required period, any other person with a valid interest may step in.

When the former owner has passed away before recovering the surplus, the personal representative of the decedent’s estate acts on behalf of the estate. Under N.C.G.S. § 28A-14.2, a personal representative has a duty to collect debts and claims owed to the decedent—including surplus bid refunds from foreclosure sales.

To recover surplus funds and properly administer them through probate, follow a two-part process. First, file a timely claim for the surplus funds with the clerk of superior court handling the foreclosure. Second, include the recovered funds in the estate inventory, manage them according to the will or intestacy laws, and distribute them to beneficiaries.

Key Steps to Recover and Administer Surplus Funds

  • Confirm eligibility: Verify that the decedent was the record owner at the time of foreclosure.
  • Check foreclosure records: Obtain the foreclosure case number and sale date from the clerk’s file.
  • File a claim for surplus: Submit an application or motion in the foreclosure case before the statutory deadline (generally two years from sale).
  • Serve notice: Notify all parties in the foreclosure proceeding as required by court rules.
  • Obtain court order or clerk’s disbursement: Once the claim is allowed, secure a court order or clerk authorization releasing the surplus to the estate.
  • Inventory the funds: List the received surplus in the estate inventory filed under N.C.G.S. § 28A-13.3.
  • Settle debts and expenses: Pay any valid creditor claims and probate costs from the estate assets, including the surplus.
  • Distribute to beneficiaries: Follow the decedent’s will or North Carolina’s intestacy statutes to distribute the remaining funds.

Recovering surplus funds after foreclosure can involve strict deadlines and specific paperwork. Administering those funds correctly under North Carolina probate law requires attention to both foreclosure procedure and estate administration rules.

At Pierce Law Group, our attorneys guide personal representatives through every step—from filing the surplus claim to distributing estate assets. Contact us today to protect your rights and fulfill your duties under North Carolina law. Email us at intake@piercelaw.com or call (919) 341-7055.