How Can a Former Spouse or Survivor Assert Entitlement to Surplus Funds Following the Owner’s Death or Divorce?

Detailed Answer

When a property in Oregon is sold at a foreclosure auction or through a court-ordered sale in probate, any sale proceeds exceeding the outstanding debt, liens and costs become “surplus funds.” Under Oregon law, a former spouse (pursuant to a property settlement in divorce) or a survivor (heir or devisee under a will or by intestacy) may assert a right to those surplus funds by filing the proper claim and presenting evidence of entitlement.

1. Foreclosure Sales

After a trustee’s sale, the trustee must deposit any surplus with the county clerk within 30 days. The clerk notifies all recorded owners and lienholders by mail. Under ORS 86.772, any person claiming all or part of the surplus may petition the court for distribution. To succeed, the claimant must:

File a motion for disbursement of surplus funds in the county circuit court where the foreclosure was recorded.
Demonstrate an interest under a final divorce decree or property settlement agreement awarding them rights to the real property or its proceeds.
Present a valid death certificate and letters testamentary or letters of administration if asserting as a personal representative or heir in probate (see ORS 113.095).
Serve copies of the motion and supporting documents on the trustee, all recorded lienholders and anyone else who received clerk’s notice.
Attend the hearing. If the court finds the claimant entitled, the clerk will issue an order directing payment of the surplus funds.

Key statutes:

2. Probate Sales

If the decedent’s real property sells as part of probate administration (for example, under ORS 116.225 et seq.), any surplus proceeds become part of the estate. A surviving spouse or heir must:

File a creditor’s claim or claim for distribution under ORS 113.095 before the claims deadline (typically four months after first publication of notice).
Attach a certified copy of the probate court’s order authorizing sale and the escrow closing statement showing surplus.
Demonstrate their status as spouse, devisee or heir by will, deed, or by proof of intestacy.

Once approved, the personal representative will distribute the net proceeds according to the will or Oregon’s intestacy rules.

Helpful Hints

Act promptly. Foreclosure surplus claims must generally be filed within one year of deposit with the county clerk.
Gather documentation early: divorce decree, property settlement, death certificate, letters of appointment.
Review the county circuit court’s foreclosure docket to confirm deadlines and parties involved.
Consider consulting an attorney for complex title issues or competing claims.
Keep proof of service of your motion or claim on all interested parties to avoid challenges later.