How to File a Special Proceeding to Recover Foreclosure Surplus Funds in South Carolina

Short answer: If a foreclosure sale produced money in excess of the debt (a surplus or overage), the former owner or any junior lienholder may be able to recover that money by filing a verified special proceeding in the county where the sale occurred. The practical steps are: confirm there is a surplus and who holds it, gather proof of your entitlement, prepare and file a verified petition (special proceeding), serve interested parties, attend the hearing, and obtain a court order directing disbursement.

Detailed answer — what a surplus is and the legal framework

When a property is sold at a foreclosure sale, sale proceeds pay the foreclosing lender first. Any remaining funds are the surplus. South Carolina foreclosure statutes and related court rules govern how those funds are handled, who is entitled to them, and how to recover them. For the statutory framework on mortgage sales and related procedures, see the South Carolina Code, Title 29, Chapter 3: https://www.scstatehouse.gov/code/t29c003.php.

Typical claimants are the former owner (mortgagor), junior lienholders, or other parties with recorded interests. Courts resolve competing claims through a special proceeding so the court can determine rights and order distribution.

Step-by-step: filing a special proceeding notice to recover surplus funds

1. Confirm a surplus exists and locate the funds holder
   • Obtain the foreclosure sale record (trustee’s deed, sale report, or the deed recorded with the county register of deeds).
   • Ask the foreclosing trustee, the law firm that handled the sale, or the county clerk of court who received the proceeds whether there is an unclaimed surplus and the exact amount.
2. Determine who can claim
   • Generally the former owner (mortgagor) and any recorded junior lienholders have priority claims. Collect documentary proof of your legal interest (deed, mortgage, recorded judgments, payoff statements, or other recorded instruments).
3. Gather documentation
   • Identification for the claimant (government ID).
   • Recorded documents showing your interest (deed, mortgage, lien, judgment).
   • Sale documents: trustee’s deed, sale notice/advertisement, sale receipts, and any correspondence from the trustee or sale attorney.
   • Evidence of amounts owed and amounts paid, if relevant (ledgers, payoff demands).
4. Prepare the verified petition (special proceeding)
   • Title the action as a special proceeding in the Circuit Court for the county where the property is located.
   • Explain: who you are, your interest in the property, facts about the foreclosure sale, the amount of the claimed surplus, and the legal basis for your claim.
   • Name and identify all interested parties (successful purchaser, foreclosing lender, trustee, junior lienholders, sheriff or clerk who holds proceeds) so the court can give them notice and opportunity to respond.
   • Attach exhibits: recorded instruments and sale documents.
   • Include a verification (sworn statement) and a request for the court to enter an order directing payment of the surplus to you or distributing it among claimants.
5. File the petition in the proper court and pay fees
   • File in the Circuit Court in the county where the property is located. The clerk’s office can confirm filing requirements and fees.
   • The matter is commonly handled as a special proceeding rather than an ordinary civil action; local practice or the judge’s standing orders may affect captioning and procedures.
6. Serve notice on all interested parties
   • Follow South Carolina service rules. Serve the foreclosing parties, the purchaser at sale, and any named lienholders or other claimants. You may need to use sheriff’s service or certified mail depending on the court’s rules.
   • File proof of service with the court.
7. Attend hearings and respond to objections
   • If there are competing claims, the court will schedule a hearing and may require evidence from each claimant. Bring original documents and witnesses if needed.
   • The judge will decide entitlement and may order interpleader, distribution, or further accounting from the trustee.
8. Obtain and enforce the court order
   • After the court grants relief, the clerk or other funds custodian will disburse funds according to the order.
   • If funds are not released voluntarily, the court’s order authorizes enforcement (clerk’s disbursement, writs, or other remedies).

Timing and practical tips

• Act quickly. Surplus funds may be held in trust or by the clerk; different time windows and procedures can apply. Prompt contact with the trustee or clerk avoids administrative delays.
• Keep copies of all filings, service proofs, and written communications. The court and trustees expect clear documentation.
• If the sale was recent, request a written accounting showing disbursements and the remaining surplus.

Common problems and how to avoid them

• Not naming all interested parties — include all recorded lienholders and the buyer at the sale to prevent later challenges.
• Poorly documented claims — attach recorded deeds, mortgages, judgments, or payoff records that show your legal interest.
• Improper service — follow South Carolina service rules so the court accepts your proof of notice.

Where to get forms and more information

• Review the foreclosure sale statutes and related provisions: South Carolina Code, Title 29, Chapter 3: https://www.scstatehouse.gov/code/t29c003.php
• Contact the clerk of court in the county where the property is located to learn local filing and fee requirements.
• Consider using a local attorney or legal aid office if you face competing claims, complicated title issues, or difficulty proving entitlement.

Helpful Hints

• Confirm the holder of the surplus before filing. Filing without knowing who holds the funds can waste time and fees.
• Collect and organize recorded documents first — a chronological exhibit packet is very helpful at the hearing.
• Be precise in the petition: state the exact dollar amount you seek and provide calculation support.
• Ask the clerk whether your county requires any local cover sheet or special caption for special proceedings.
• Consider early negotiation. If a junior lienholder or purchaser is willing to settle, you may avoid contested court time.

Disclaimer: This article explains general South Carolina legal principles about foreclosure surplus funds and describes common procedural steps. It is educational only and is not legal advice. For advice tailored to your situation and help preparing and filing court papers, consult a licensed South Carolina attorney.