Disclaimer: This article is for general information only and is not legal advice. Consult a licensed attorney in Hawaii before taking action.
Detailed Answer — How the special proceeding to recover foreclosure surplus funds generally works under Hawaii law
When a foreclosure sale produces more money than is needed to satisfy the mortgage, the excess — commonly called the “surplus” or “overage” — belongs to whoever has legal priority to it (often the former owner, junior lienholders, or others with recorded interests). In Hawaii, recovering those funds typically requires filing a special proceeding in the Circuit Court for the county where the foreclosed property is located and asking the court to order distribution of the surplus. The court will review competing claims, decide priority, and direct who receives money on deposit from the sale.
Step-by-step process (typical steps to file a special proceeding in Hawaii)
- Confirm that a surplus exists and who holds the funds.
Obtain the foreclosure sale documentation: sale report, trustee’s or sheriff’s deed, and any payment accounting. The sale paperwork or the entity that conducted the sale (trustee, sheriff, or court) will usually show whether there were surplus proceeds and where they are being held. If the sale was handled by the court, the clerk may be holding funds; if a private trustee or the sheriff conducted the sale, that office may hold the funds.
- Check statutory framework and priorities.
Review Hawaii’s foreclosure laws and related rules for how proceeds are applied and for general procedure. Relevant state law on foreclosure procedure (including sale and distribution) appears in Hawaii Revised Statutes, Chapter 667. You can review the chapter online: https://www.capitol.hawaii.gov/hrscurrent/Vol12_Ch0651-0700/HRS0667/
- Identify all potentially interested parties.
Make a title or lien search (county Bureau of Conveyances or Real Property Records) to list junior lienholders, taxing authorities, judgment creditors, and any other recorded interests on the property. The court will expect you to name and serve all parties who might claim the surplus.
- Gather supporting documents.
Assemble documents that prove your right to the surplus: deed, promissory note, payoff statements, redemption or release documents (if any), the foreclosure sale report, accounting showing surplus amount, and identification. Clear, organized exhibits will make a court hearing smoother.
- Prepare the special proceeding petition (or motion) to determine distribution.
Draft a petition (sometimes called a petition for determination of distribution or for order directing payment of surplus funds). Typical content:
- Court caption (Circuit Court, county where property is located).
- Statement of your interest and relationship to the property.
- Facts about the mortgage, foreclosure sale, and the exact surplus amount and where it is held.
- List and addresses of all known parties with possible claims.
- Relief requested: e.g., a court determination that petitioner is entitled to X dollars and an order directing the clerk/trustee/sheriff to pay petitioner.
- Attachments: sale report, recorded documents, title/lien search results, identification, any written demands made to the holder of the funds.
- File the petition in the correct Circuit Court and pay filing fees.
File in the Circuit Court for the county where the property is located. Each Circuit Court has local rules and fee schedules; check the Hawaii Judiciary website for forms and local requirements: https://www.courts.state.hi.us/forms and https://www.courts.state.hi.us/courts/circuit. If you cannot afford filing fees, ask the clerk about a fee waiver or in forma pauperis procedures.
- Serve all interested parties properly.
Service must follow Hawaii Rules of Civil Procedure and local rules. Typically you must serve the petition and any supporting documents on: the foreclosing party, trustee or sheriff who conducted the sale, all junior lienholders, and anyone else with a recorded interest or a known claim. If you cannot locate some parties, you may need to ask the court to allow service by publication; the court will require proof of diligent efforts to locate those parties.
- Attend the court hearing and present evidence.
The court will schedule a hearing. Be prepared to explain your claim, present your documents, and answer questions about the priority of competing claims. If multiple claimants appear, the court will decide priority and may divide the funds accordingly.
- Obtain and use the court order for distribution.
If the court finds in your favor (in whole or in part), it will issue an order directing release of the surplus from whoever is holding it. That order typically instructs the clerk, sheriff, or trustee to pay specified sums to named parties. Follow the court’s instructions to obtain payment (identification, endorsed forms, or a verified claim may be required).
- If the claim is contested.
If another party disputes your claim, the court may require additional proofs, allow discovery, or set the matter for trial. Consider mediation or negotiating with other claimants to avoid protracted litigation. If you anticipate contest, consult an attorney early.
Where to find forms, local rules, and help
- Hawaii Judiciary forms and self-help resources: https://www.courts.state.hi.us/forms
- Hawaii Circuit Courts (local filing rules and clerk contact information): https://www.courts.state.hi.us/courts/circuit
- Hawaii Revised Statutes, including foreclosure provisions (Chapter 667): https://www.capitol.hawaii.gov/hrscurrent/Vol12_Ch0651-0700/HRS0667/
Common documentary proof you should bring to court
- Recorded deed or deed of trust and note.
- Foreclosure sale report, trustee or sheriff deed, or clerk’s receipt showing the surplus.
- Title or lien search showing priority of interests.
- Demand letters, payoff statements, and correspondence with the entity holding the funds.
- Government-issued photo ID and proofs of ownership (tax bills, utility bills, etc.).
Helpful Hints
- Start early: statutes of limitation or time windows can bar claims if you wait too long — check the applicable statutes and court rules.
- Do a complete title/lien search before filing so you can name all interested parties and avoid delays for additional service.
- Get certified copies of foreclosure sale paperwork and records from the foreclosure trustee or the court clerk; these are often required as exhibits.
- Ask the court clerk if a local form or specific caption is expected — some counties have sample petitions or guidance.
- If you expect contest from other claimants, consider hiring an attorney experienced in Hawaii foreclosure or real property litigation; contested special proceedings can become complex.
- Keep careful records of every communication with the party holding funds; a clear paper trail strengthens your petition.
- Be prepared for tax consequences; receiving surplus funds can have tax implications — consult a tax advisor.
- If you cannot locate interested parties, document your search efforts thoroughly (addresses checked, records searched) before asking the court for alternative service (such as publication).