Disclaimer: This article is for educational purposes only and is not legal advice. Consult a licensed attorney in Texas for guidance on your specific situation.
Detailed Answer
Understanding Texas Foreclosure Surplus Funds
When a property in Texas sells at a foreclosure auction for more than the total debts secured by liens, the extra money is called “surplus funds.” Under Texas Property Code § 51.002(d)(2), the county clerk must distribute that surplus to anyone entitled to it after paying the senior liens and sale costs. See: Tex. Prop. Code § 51.002(d).
Identifying Other Creditors or Lienholders
Besides the primary mortgage lender, other entities may hold junior liens or claims that attach to surplus funds. Common examples include:
- Second mortgages or home equity lines of credit
- Recorded judgment liens (e.g., creditor lawsuits)
- Mechanic’s or materialman’s liens for contractor work
- Tax liens from unpaid property, state, or federal taxes
- UCC financing statements on business assets
Steps to Determine Claims on Surplus Funds
- Search the Real Property Records: Visit the county clerk’s or recorder’s office (online or in person) to pull the property’s title history. Look for any recorded deeds of trust, judgment liens, mechanic’s liens, or uniform commercial code (UCC) filings.
- Check Lien Priority: Texas law pays liens in order of their recording date (first in time, first in right). Senior liens (earlier-recorded) absorb surplus before junior liens.
- Review the Clerk’s Notice: After a foreclosure sale, the clerk must post or publish a notice inviting claims for surplus funds. Under Tex. Prop. Code § 51.002(d)(2), creditors must file a written claim with the clerk within the deadline (often 120 days).
- File a Written Claim: If you hold a junior lien, submit a claim form to the clerk’s office. Include a copy of the recorded lien instrument and your contact information.
- Attend the Disbursement Hearing: In some counties, the clerk or the court may schedule a hearing under Texas Rules of Civil Procedure Rule 309a to resolve competing claims. Be prepared to present your proof of lien.
- Monitor Deadlines: Missing the clerk’s deadline can forfeit your right to surplus. Confirm the exact timeline with the county clerk’s office.
Helpful Hints
- Request a full title report from a title company for a comprehensive lien search.
- Verify the recording dates—priority determines who gets paid first.
- Keep copies of all lien documents and claim filings for your records.
- Consult the county clerk’s website for local claim deadlines and procedures.
- Consider hiring a title attorney or abstractor if multiple liens complicate the priority order.