Disclaimer: This article provides general legal information and does not constitute legal advice.
Detailed Answer
When a foreclosure or judicial sale in Iowa yields surplus funds, the clerk of court must distribute the balance according to priority under Iowa law. To determine whether other creditors or lienholders could claim these funds, follow these steps:
- Review the Foreclosure Judgment. The judgment names the primary mortgagee and any known lienholders. Note the amounts and lien priorities outlined in the order.
- Consult Iowa Code §654.21. This statute explains how the clerk applies sale proceeds. Iowa Code §654.21 requires the clerk to pay costs, fees, and secured claims in priority order, then deposit any surplus.
- Search County Recorder Records. Use the county recorder’s online system or visit in person to search for recorded mortgages, deeds of trust, property tax liens (Iowa Code §445.12), mechanics’ liens, and other encumbrances.
- Check Judgment Liens. Access the clerk of court’s docket to find judgment liens filed against the debtor. Judgment liens attach to real property and may have priority over later filings.
- Search UCC Filings. Determine if the debtor granted security interests in personal property by running a UCC-1 financing statement search through the Iowa Secretary of State’s website: Iowa UCC Search.
- Identify Federal and State Tax Liens. Federal tax liens appear on the IRS public records; state tax liens may be recorded at the county level or filed with the Iowa Department of Revenue.
- Verify Lien Priority. Under Iowa’s “first to file or perfect” rule (Iowa Code §554.3501), earlier-recorded liens take precedence. Confirm recording dates and perfection methods.
- File a Claim for Surplus Funds. Creditors and lienholders must file a written claim with the clerk within 30 days after the sale to receive payment from surplus funds. Late claims may be barred. See further guidance in Iowa Code §654.21.
By completing these searches and filing timely claims, you can identify additional parties entitled to surplus funds and protect their interests.
Helpful Hints
- Obtain a title abstract or hire a title company for a comprehensive lien report.
- Verify property tax status before the sale to uncover hidden tax liens.
- Confirm redemption periods under Iowa Code §626.
- Check for federal tax liens via the IRS’s public lien search tool.
- Consult the clerk of court about filing deadlines and required fees.