Disclaimer: This article is for informational purposes only and does not constitute legal advice.
Detailed Answer
When a property or asset sells under execution or foreclosure for more than the debt owed, the officer conducting the sale must hold any surplus funds for up to one year. Under Tennessee law, creditors or lienholders who held valid, recorded claims before the sale may apply to recover those surplus proceeds. See Tenn. Code Ann. § 35-5-118.
To determine whether other creditors or lienholders can claim a share of the surplus, follow these steps:
- Conduct a Title and Public Records Search
Search the county Register of Deeds’ records for deeds of trust, mortgages, judgment liens, and other recorded liens. Ensure you review the sequence of recordings—priority often follows recording date. - Check the Judgment Docket
Visit the clerk’s office or online database where the debtor resides or where the judgment was entered. Judgments become liens when docketed and may attach to the property sold. - Search UCC Filings
Use the Tennessee Secretary of State’s Uniform Commercial Code (UCC) search (tnbear.tn.gov) to locate security interests in personal property that might claim priority in surplus funds. - Review Tax and Municipal Liens
Check county tax assessor and collector records for unpaid real property taxes. Also contact the local municipality for unpaid utility or code-enforcement liens. - Investigate Mechanics’ and Materialmen’s Liens
If work or materials were provided on the property within the statutory period (within 90 days of completion or abandonment), those providers may file liens under Tenn. Code Ann. § 66-11-101 et seq. - Observe Notice Requirements and Deadlines
Under Tenn. Code Ann. § 35-5-118, the officer must publish notice of the surplus and hold funds for one year. Creditors must apply within that year to preserve their claim.
By combining a thorough public-records review with an understanding of lien priorities and statutory deadlines, you can identify all potential claimants to surplus funds and advise the sale officer or trustee accordingly.
Helpful Hints
- Order a title report early to uncover hidden liens.
- Visit local clerk and register offices in person for the most up-to-date records.
- Set calendar reminders for filing deadlines under Tenn. Code Ann. § 35-5-118.
- Consult a licensed Tennessee title examiner for complex lien histories.
- Consider bond or surety requirements if you handle surplus disbursements.