How to File a Special Proceeding to Recover Foreclosure Surplus Funds in New Mexico

What the money is and who may claim it

When a mortgage or deed-of-trust sale produces proceeds in excess of the debt, costs, and lawful fees, the extra money is called a foreclosure surplus (sometimes “overage” or “excess proceeds”). In New Mexico, former owners, junior lienholders, and other parties with legal claims against the property are the typical claimants. To obtain those funds you generally must start a formal court process — commonly called a special proceeding or petition to claim surplus funds — and notify anyone with a possible interest so the court can distribute the money to whomever is legally entitled to it.

Overview of the typical step-by-step process in New Mexico

1. Confirm that a surplus exists and who holds the funds.

   Get the sale paperwork (trustee’s deed, sheriff’s or trustee’s sale record, accounting of sale proceeds). The trustee or sheriff who conducted the sale often holds the excess briefly; in some cases the holder will deposit the funds with the court. Before you file anything, ask the trustee/sheriff in writing where the surplus is and whether they have a procedure for distribution.

2. Identify the correct court and filing type.

   In New Mexico, petitions to distribute excess proceeds from a foreclosure are typically filed in the district court of the county where the foreclosed property is located. The court will handle the special proceeding and issue an order directing distribution of funds. (See the New Mexico Judiciary website for court contacts and local filing rules: https://nmcourts.gov/self-help/.)

3. Prepare a written petition (special proceeding).

   Draft a petition that includes:

   • The court name and case caption;
   • Your name, address, and the names of all known interested parties (buyer at sale, trustee/sheriff, mortgagee or junior lienholders);
   • A clear description of the property (legal description or street address) and the foreclosure sale date;
   • The amount of surplus you claim, with a short accounting showing how you calculated it (sale price minus mortgage balance, fees, and costs);
   • Your legal basis for the claim (example: former record owner, holder of a recorded junior lien, assignee, etc.);
   • Copies of supporting documents — deed of trust or mortgage, recorded lien instruments, the trustee’s/sheriff’s deed, and any accounting from the sale;
   • A request that the court enter an order awarding the surplus (in whole or in part) and directing whoever holds the funds to distribute them accordingly.
4. File the petition and pay filing fees.

   File the petition in the appropriate district court clerk’s office. Counties set filing fees; ask the clerk or check the court website for the current amount. If you cannot pay, ask the clerk about filing in forma pauperis procedures.

5. Serve notice on all interested parties.

   Proper notice is crucial. Serve the trustee or sheriff, the purchaser at the sale (if known), the foreclosing lender, and any junior lienholders listed in public records. If any interested party’s address is unknown, the court may permit substituted service or require publication in a local newspaper. Follow the New Mexico Rules of Civil Procedure and local court rules about service for special proceedings; the court will not rule until notice requirements are satisfied.

6. Respond to objections and go to hearing.

   After service, interested parties have an opportunity to object (for example, a junior lienholder may claim all or part of the surplus). The court will schedule a hearing where you must present evidence supporting your claim. Evidence can include recorded documents, affidavits, accountings, and receipts. The court decides the priority of claims and issues an order directing payment.

7. Collect the funds and close the case.

   Once the court issues an order, the holder of the funds (trustee, sheriff, or court registry) pays the claimant(s) as directed. If you receive funds, keep all receipts and send copies to the court so the file can be closed.

8. Appeals and enforcement.

   If the court denies your claim or you dispute the distribution, you may have a right to appeal under New Mexico appellate rules. If a party refuses to follow a court order, file a motion to enforce the judgment with the court that issued the order.

Key procedural references and resources

• New Mexico Courts — Self Help & Court Rules: https://nmcourts.gov/self-help/
• New Mexico Legislature — Statutes and legal code search: https://www.nmlegis.gov/laws/Statutes/ (use this site to look up statutory provisions that may relate to foreclosure procedures and priorities)
• Contact the district court clerk in the county where the property is located for local filing forms and fee information: https://nmcourts.gov/courts/district-court/

Timing and limitations

Deadlines vary. Some statutes of limitation or procedural deadlines may apply depending on the type of foreclosure (judicial vs. non-judicial) and whether the holder of funds deposited the money with the court. Act promptly: delay can make it harder to locate records, notify interested parties, or meet court timelines.

When to consult an attorney

If multiple parties claim the surplus, if ownership is disputed, or if the facts are complicated (assignments, bankruptcies, unclear recordings), hiring an attorney experienced in New Mexico real property and foreclosure law is strongly recommended. An attorney can prepare pleadings, verify priority of liens, handle service and publication, and represent you at hearings.

Disclaimer: This article is for general informational purposes only and does not constitute legal advice. Consult a licensed New Mexico attorney about your specific situation.

Helpful Hints

• Gather all property and sale documents before you file: recorded deed, deed of trust/mortgage, HUD-1 or closing statements if available, trustee’s/sheriff’s sale notice, and accounting of proceeds.
• Check public records online (county clerk/recorder) to find recorded liens and the purchaser at the sale.
• Contact the trustee or sheriff first to confirm whether they hold the surplus and whether they have an internal claim form or required steps.
• Keep clear written records of every call, letter, and document. File-stamped copies from the court and service receipts are essential evidence.
• If you cannot find all interested parties, ask the court clerk about required publication procedures; the court often allows notice by newspaper when a person’s address is unknown.
• Be realistic about sharing the proceeds: courts award funds according to recorded priority. A junior lienholder with a valid lien will generally have a priority claim over a former owner without other encumbrances.
• Use the district court clerk’s office as a resource. Clerks can explain filing steps and local forms but cannot give legal advice.
• If the amount at stake is small, compare the likely recovery to filing costs and attorney fees before spending significant time or money pursuing a claim.