Detailed Answer
When a foreclosure sale in Vermont generates surplus funds, these excess proceeds may face claims from other creditors or lienholders. To determine potential claims, follow these steps:
- Review Foreclosure Statute. Under Vermont’s foreclosure‐by‐sale law, net sale proceeds first satisfy the foreclosing mortgage, sale costs, and taxes. Remaining surplus then goes to parties with valid liens and superior priority (9 V.S.A. § 2201).
- Identify Recorded Liens. Any lien recorded before the foreclosure “recording date” may attach to surplus funds. Check county land records for:
- Mortgages or deeds of trust
- Mechanic’s liens (9 V.S.A. § 2411)
- Judgment liens (12 V.S.A. § 4041)
- State and federal tax liens
- UCC-1 financing statements
- Determine Lien Priority. Vermont follows “first in time, first in right.” Earlier‐recorded liens rank above later ones (9 V.S.A. § 2411). After the foreclosing mortgage, the court or commissioner distributes surplus by priority order.
- Check Tax and Government Liens. State or municipal tax liens attach automatically and may have priority. Verify with the Vermont Department of Taxes and local tax collector.
- Research Judgment Liens and UCC Filings. Search the Vermont Secretary of State’s UCC records and county clerk’s records for recorded judgments that create liens.
- Consult Court Records. Foreclosure commissioners or the court clerk maintain dockets listing creditors who filed claims after notice. Review these to identify late‐filed or senior claims.
- Calculate and Distribute Surplus. The court orders distribution in descending priority until the surplus is exhausted. If lower‐priority liens consume all funds, junior lienholders receive nothing.
Disclaimer: This article does not offer legal advice. Consult a qualified attorney to protect your rights.
Helpful Hints
- Perform a thorough title search before purchasing foreclosure surplus rights.
- Obtain certified lien and judgment abstracts from the county clerk.
- Monitor notice deadlines: unclaimed surplus may revert to the municipality.
- Consider hiring a title company for complex lien landscapes.
- Verify tax lien payoff demands with authorities before distribution.