Detailed Answer
When a foreclosure sale in Tennessee produces more funds than needed to cover the debt, the excess, known as “surplus proceeds,” remains with the court clerk. Under Tennessee law, a former owner or lienholder can petition the Circuit or Chancery Court to recover these funds. Here’s how:
1. Identify Surplus Funds
After the trustee’s sale, the clerk prepares an accounting. If sale proceeds exceed the debt, costs, and liens, the excess becomes surplus (see Tenn. Code Ann. § 35-5-117).
2. Verify Eligibility and Deadlines
- Petitioner must have been an owner or lienholder at the time of sale.
- Claims generally must be filed within one year of the sale date; confirm with court rules.
3. Prepare and File the Petition
In the court where the foreclosure occurred (Circuit or Chancery), file a “Petition for Distribution of Surplus Proceeds.” Include:
- The foreclosure case number and sale date.
- Documentation of your interest (deed, recorded lien).
- The exact amount claimed.
- An affidavit supporting your entitlement.
4. Pay the Required Filing Fee
Fees vary by county. Refer to Tenn. Code Ann. § 8-21-401 or consult the clerk’s fee schedule.
5. Serve Notice of the Petition and Hearing
Serve all known lienholders, the foreclosing trustee or creditor, and the clerk of court. Provide proof of service before the hearing.
6. Attend the Hearing
The court will review your petition, hear any disputes, and determine distribution priority. If approved, the court orders the clerk to disburse the surplus.
7. Collect Your Funds
Submit the court’s order to the clerk with any required disbursement forms. The clerk will issue payment to you.
Disclaimer: This article is for educational purposes only and does not constitute legal advice. Consult a licensed attorney to discuss your specific situation.
Helpful Hints
- Request an accounting of sale proceeds from the county clerk’s office.
- Verify filing deadlines to avoid waiving your claim.
- Retain clear records of dates, notices, and expenses.
- Consider legal assistance if multiple claimants compete for surplus.
- Review updated Tennessee statutes at capitol.tn.gov.