Disclaimer: This article is for educational purposes only and does not constitute legal advice. Consult an attorney for advice tailored to your situation.
Detailed Answer
Understanding Surplus Funds in Wisconsin Foreclosures
When a mortgage foreclosure sale in Wisconsin yields money beyond what is needed to satisfy the mortgage, the extra amount is called “surplus funds.” These funds may be subject to claims by junior lienholders or judgment creditors. Under Wisconsin law, the court must hold these funds until it resolves competing claims.
1. Statutory Framework
Wisconsin’s foreclosure statutes govern surplus funds. Key provisions include:
- Wis. Stat. § 846.17 – Sale procedures and distribution of proceeds.
- Wis. Stat. § 846.165 – Procedures for claimants to assert rights to surplus funds.
- Wis. Stat. § 846.18 – Disbursement of sale proceeds and filing requirements.
2. Conduct a Title and Lien Search
Begin by reviewing public records at the county register of deeds and clerk of courts. Search for:
- Recorded mortgages and deeds of trust (including junior mortgages).
- Mechanic’s liens for unpaid contractors or suppliers.
- Judgment liens from civil lawsuits.
- Municipal tax liens and special assessments.
- Uniform Commercial Code (UCC) filings on personal property.
- Federal tax liens recorded with the IRS or county.
Order certified copies of each lien document. Note recording dates and amounts. This establishes priority and helps identify potential claimants.
3. Reviewing Statutory Notice Requirements
Under Wis. Stat. § 846.165, the court clerk must publish notice of the surplus sale in a local newspaper. That notice invites anyone with an interest to file a claim within 30 days. Check the published notice and ensure you know the deadline for filing.
4. Evaluating Priority of Claims
Wisconsin applies a “first in time, first in right” rule for most liens:
- Senior liens (e.g., first mortgage) get paid first.
- Junior liens (e.g., second mortgage, mechanic’s lien) follow in order of recording date.
- Judgment and tax liens attach afterward by their recording date.
Creditors with earlier recording dates may exhaust all surplus funds before junior lienholders receive anything.
5. Claim Filing Deadline and Court Hearing
To protect a claim, a creditor must file a written notice of claim with the circuit court within 30 days after the first publication of notice. This notice must state:
- The amount claimed.
- The nature of the lien or debt.
- Evidence of recording date.
After the deadline, the court schedules a hearing. Each claimant presents documentation to support priority and amount. The judge then orders distribution of the surplus to valid claimants.
Helpful Hints
- Start your lien search early to avoid missing hidden claims.
- Use the county’s online and in-person records to cross-check UCC and judgment filings.
- Mark your calendar with the first publication date and deadline for claims.
- Gather certified copies of lien documents to present clear proof at the hearing.
- Consider working with a title company or real estate attorney for a comprehensive search.
- Attend the claims hearing or send a qualified representative to protect your interests.