Disclaimer: This article is for educational purposes only and does not constitute legal advice. Consult a qualified attorney to discuss your specific situation.
Detailed Answer
When a foreclosure or lien-enforcement sale produces surplus funds under Alabama law, those funds must first satisfy higher-priority claims before reaching the former owner. Follow these steps to determine if other creditors or lienholders may have valid claims:
1. Review Statutory Distribution Rules
Alabama Code §6-6-230 sets the order for distributing sale proceeds. After paying sale costs and the foreclosing lien, surplus funds go first to unpaid property taxes, then to senior liens by date of recordation, next to junior liens, and finally to the debtor. See Ala. Code §6-6-230.
2. Search County Land Records
Visit the county probate office or register of deeds to inspect recorded mortgages, deeds of trust, mechanics’ liens, and other encumbrances. Liens rank by recording date, so older liens generally get paid first.
3. Check for Judgment Liens and Federal Tax Liens
Search the circuit court clerk’s judgment index for recorded judgment liens. Judgment liens arise when a court docket order is recorded. Federal tax liens may appear in land records; you can also verify with the IRS’s Transcript Delivery System or by contacting the local IRS Revenue Officer.
4. Investigate UCC-1 Financing Statements
Secured lenders in personal property interests file UCC-1 financing statements under Ala. Code §7-9A-501. Check the Alabama Secretary of State’s UCC filing database for any active statements against the debtor.
5. Note Redemption and Claim Deadlines
Under Alabama Code §6-6-236, junior lienholders and other interested parties may redeem the property or file claims against surplus funds within six months after the sale. Missing that deadline generally forfeits the right to assert a claim on the surplus.
By systematically reviewing these sources—county land records, judgment dockets, UCC filings, and tax lien records—you can identify any parties with a lawful right to share in surplus proceeds and confirm the priority of their claims.
Helpful Hints
- Order a professional title search to uncover hidden or obscure liens.
- Obtain certified copies of all recorded documents to verify recording dates and parties.
- Use online county recorder portals when available to speed up your search.
- Track all statutory deadlines carefully—late claims often get barred.
- Consider consulting a real estate or foreclosure attorney to handle complex priority disputes.