Understanding Creditor and Lienholder Claims to Surplus Funds in Oklahoma

Disclaimer: This article is for educational purposes only and does not constitute legal advice.

Detailed Answer

When a property in Oklahoma sells at sheriff’s sale for more than the total indebtedness, the excess proceeds become “surplus funds.” These funds do not automatically revert entirely to the homeowner. Creditors and lienholders with valid claims can step in to assert rights to those funds. To determine who might have a claim, follow these steps:

1. Conduct a Thorough Title Search

Begin by obtaining a full title report. This report lists recorded liens, judgments, and encumbrances in priority order. In Oklahoma, liens attach in the order of recording and generally follow:

Property tax liens
Special assessments (e.g., sewer or sidewalk liens)
Mortgage and deed of trust liens
Mechanic’s and materialman’s liens
Judgment liens
Federal tax liens

2. Review Statutory Distribution Rules

Oklahoma law governs how a sheriff distributes sale proceeds. Under 12 O.S. § 687, the sheriff must pay:

Sale costs and fees
All liens in the order of their priority
Any remaining surplus to the former owner or other claimants

See the statute for full details: 12 O.S. § 687.

3. Identify Potential Claimants

After reviewing the title report, list every creditor or lienholder whose lien remains unpaid. Common claimants include:

Second mortgages or home equity lines of credit
Unpaid property taxes
Construction or renovation contractors (mechanic’s liens)
Child support judgment creditors
Internal Revenue Service (federal tax liens)

4. Verify Timing and Priority

Oklahoma law enforces strict priority by recording date. For example, a mechanic’s lien recorded after the mortgage will stand behind the mortgage lien. You must confirm:

Recording dates on each lien document
Proper service of notice for each lien
Whether any liens expired or were discharged

5. File a Claim for Surplus Funds

Creditors seeking surplus funds must file a claim in the sheriff’s office that conducted the sale. Oklahoma law requires claimants to act promptly. Often, claimants have one year from the sale date to bring a court action to recover surplus funds under 12 O.S. § 689.

Helpful Hints

Order a current title search from an Oklahoma-licensed title company to avoid missing hidden liens.
Check county clerk’s online records for recent judgments or tax liens.
Confirm recording accuracy by examining stamped recording dates on lien certificates.
Retain copies of all recorded documents and proof of service.
Consult an attorney promptly if multiple claimants contest the surplus.