Understanding Claims on Surplus Funds After a Georgia Foreclosure Sale

Disclaimer: This article is for educational purposes only and does not constitute legal advice. Consult a qualified attorney to address your specific situation.

Detailed Answer

When a property in Georgia is sold at a foreclosure sale and the sale generates surplus funds (the amount remaining after paying all costs and the foreclosing creditor’s debt), other creditors or lienholders may step forward to claim those funds. Georgia law sets out a process for determining which parties have valid claims and in what order they’re paid.

1. Identify All Recorded Liens and Judgments

Begin with a comprehensive title search. In Georgia, any mortgage, deed to secure debt, judgment lien, mechanic’s lien, or tax lien must be recorded with the county clerk to be enforceable. Look for:

Mortgages or deeds to secure debt (priority by recording date).
Judgment liens under O.C.G.A. § 9-12-80 (recorded judgments attach to real estate).
Mechanic’s liens under O.C.G.A. § 44-14-361 (construction liens).
Tax liens, including federal and state income taxes (IRS liens can have superpriority).

2. Understand Georgia’s Priority Rules

Georgia follows a “first in time, first in right” approach. The order of payment generally is:

Costs of sale and foreclosure (trustee or judicial sale expenses).
The foreclosing creditor’s debt (the one who initiated the sale).
Other valid liens and judgments in order of their recording date.
Any junior lienholders or unsecured creditors with timely claims.

See O.C.G.A. § 44-14-161(b), which requires the foreclosure trustee to deposit surplus funds with the clerk of the superior court. O.C.G.A. § 44-14-161.

3. File a Claim with the Clerk of Superior Court

Creditors must file a written claim for surplus funds in the county where the foreclosure took place. The claim should include:

Proof of the debt or lien (e.g., recorded instrument, certified judgment).
Evidence of recording date to establish priority.
Contact information and detailed calculation of the unpaid balance.

Georgia law sets a one-year statute of limitation for claims against deposited surplus funds. See O.C.G.A. § 9-12-61 (claims against funds held by a public officer).

4. Watch for Objections and Priority Disputes

Other claimants and the foreclosing creditor can object to your claim. The court will hold a hearing to:

Resolve competing claims.
Determine whether liens were properly recorded.
Allocate funds according to statutory priority.

If the court approves your claim, the clerk will distribute your share of the surplus.

Helpful Hints

Order a title report early to uncover hidden liens or judgments.
Check for unrecorded or pending UCC filings that may attach to fixtures.
Contact the county clerk’s office for local filing requirements and deadlines.
Consider hiring a title lawyer or paralegal to verify all encumbrances.
Monitor your claim: if you don’t receive notice of objection, follow up with the clerk.
Be aware of potential federal tax liens, which may have priority over other secured creditors.