Short Answer

In North Carolina, surplus foreclosure proceeds are held by the Clerk of Superior Court and may be invested while the funds remain with the clerk. You (or your attorney) can ask the clerk to invest the funds under state law so interest accrues until disbursement, subject to a small statutory investment fee. After the court orders distribution, the court no longer manages your money—place your share in your own interest-bearing account or CD to keep earning interest.

Understanding the Problem

You want your North Carolina surplus foreclosure proceeds to earn interest. The decision point is when and how to keep the funds in an interest-bearing vehicle: (1) while the Clerk of Superior Court holds the surplus pending your hearing and (2) after the clerk distributes your share to you. You’ve filed your petition, all heirs have been served, a hearing is set, and there’s a disagreement about how attorney fees will be deducted.

Apply the Law

Under North Carolina law, surplus funds from a power-of-sale foreclosure are paid into the Clerk of Superior Court and disbursed by court order to the entitled parties. The clerk has statutory authority to invest money held by virtue of the office; interest (net of a capped investment fee) follows the principal when the clerk disburses. The surplus proceeding is heard in the Special Proceedings file by the Clerk of Superior Court, and parties typically have a short response window before hearing. If the funds will be held for months, ask the clerk to invest them pending the fee dispute and distribution.

Key Requirements

• Request investment while held by the clerk: Ask the Clerk of Superior Court to invest the surplus pending the hearing and order; the clerk generally must invest eligible funds and interest will follow the principal.
• Mind the investment thresholds and timing: The clerk decides investments and, when certain thresholds are met, must act within set timelines; you can reinforce this with a written motion or request.
• Address attorney-fee allocation in the order: Ask the clerk to specify whether any approved fees come “off the top” or from specific parties’ shares and to confirm that accrued interest is paid with each party’s principal.
• After distribution, use your own interest-bearing vehicle: Once you receive your share, deposit it into an account or CD that pays interest; avoid law firm trust (IOLTA) deposits if your goal is personal interest, as those interest earnings do not go to clients.
• Keep funds with the clerk if disputes linger: If fee disputes could delay payment, ask the clerk to keep the money invested and consider partial distributions so some funds begin earning for you sooner.

What the Statutes Say

• North Carolina Gen. Stat. § 45-21.31 (Disposition of foreclosure sale proceeds) – Surplus proceeds are paid to the clerk and disbursed to entitled parties by order.
• North Carolina Gen. Stat. § 7A-112 (Investment of funds by clerk) – Authorizes and, in some situations, requires the clerk to invest funds held by virtue of office.
• North Carolina Gen. Stat. § 7A-308.1 (Clerk investment fee) – Sets a modest investment fee and caps it against earnings.
• North Carolina Gen. Stat. § 1-394 (Special proceeding answer timeline) – Provides a short response period (typically 10 days) after service before hearing.

Analysis

Apply the Rule to the Facts: You’ve filed, served all heirs, and have a hearing scheduled. Ask the Clerk of Superior Court to keep the surplus invested under the clerk’s investment authority until the fee dispute is resolved and the order of distribution is entered; any interest (minus the statutory investment fee) will be paid with your share. Because you hold a majority stake, also ask the clerk to specify in the order how attorney fees will be deducted so accrued interest follows the correct principal amounts.

Process & Timing

1. Who files: Claimant/petitioner. Where: Clerk of Superior Court in the county where the foreclosure special proceeding is filed. What: Petition for Disbursement of Surplus Proceeds and a written request or motion that the clerk invest the funds while held. When: After sale confirmation; respondents typically have about 10 days from service to answer.
2. The clerk sets a hearing after the response period. If the surplus is sizable and likely to be held for months, the clerk should place funds in an authorized investment and generally act within about 60 days of receipt when statutory thresholds apply. Timeframes can vary by county.
3. The clerk enters an order allocating shares, resolving fee deductions, and directing disbursement. The clerk issues payment of principal plus any accrued interest (net of the statutory investment fee). You then place your funds in your own interest-bearing account or CD.

Exceptions & Pitfalls

• If the clerk expects to hold the money only briefly or the amount is small, it may not be invested; submit a prompt request anyway.
• The clerk’s investment fee applies but is capped against earnings; understand that very conservative investments may yield modest interest.
• IOLTA trust accounts do not pay interest to clients; request distribution directly to you for deposit into your own interest-bearing account.
• If any claimant is a minor or incompetent, the clerk may require different handling that affects investment and timing.
• If fee allocation is unclear, distributions can be delayed; consider partial distributions and keep disputed amounts invested until the order is final.

Talk to a Surplus Funds Attorney

If you’re dealing with surplus foreclosure proceeds and want to preserve interest while resolving fee issues, our firm has experienced attorneys who can help you understand your options and timelines. 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.