What Are Surplus Funds in North Carolina
(and why they get paid to the clerk)?
When a foreclosure sale brings in more money than is needed to cover the amounts that must be paid from the sale proceeds, the remaining balance is commonly called surplus funds (sometimes “excess proceeds”). North Carolina’s foreclosure statutes explain both how proceeds are applied and what happens to any surplus.§ 45‑21.31. Disposition of proceeds of sale; payment of surplus to clerk.
This overview covers:
where surplus funds come from,
when surplus is paid to the Clerk of Superior Court,
what it means if the clerk is holding the funds,
who may be entitled, and
how foreclosure surplus relates to North Carolina’s unclaimed property system.
1) Where do surplus funds come from?
Under N.C.G.S. § 45-21.31, the person making the sale applies the proceeds in a statutory order, including:
1. Costs and expenses of the sale;
2. Taxes due on the property sold;
3. Payment of special assessments on the property sold;
4. Any note or obligation secured by a mortgage, deed of trust or conditional sale contract
Surplus funds are what remain after these required payments are made.
2) Why are surplus funds sometimes paid to the Clerk of Superior Court?
North Carolina law anticipates that the person conducting the sale (often the trustee) may not always be able to safely or confidently pay the surplus directly to the right person.
Under N.C.G.S. § 45-21.31, the surplus may be paid into the clerk’s office in situations where, for example, the person making the sale:
cannot locate the person entitled to the surplus,
does not know who is entitled to it,
is in doubt as to entitlement, or
there are adverse/competing claims to the surplus.
Once the surplus is paid to the clerk, the statute provides that this discharges the mortgagee/trustee/vendor from liability to the extent of the amount paid, and the clerk issues a receipt.
3) What it means when the clerk is holding surplus funds
When surplus is paid into the clerk’s office under § 45-21.31, North Carolina provides a statutory path to determine who gets it:
A person claiming the money may institute a special proceeding before the Clerk of Superior Court under N.C.G.S. § 45-21.32 to determine who is entitled to the surplus.
The statute also requires that certain other claimants be made parties—specifically, those who filed a notice of claim with the clerk and those who, as far as the petitioner knows, assert any claim.
If an answer raises issues of fact, the matter is transferred to the civil issue docket of Superior Court for trial (with statutory provisions on a cost bond and potential attorney’s fees/costs)
This is why surplus funds claims often involve a clerk-filed proceeding even when the underlying foreclosure is already complete.
4) Who may be entitled to surplus funds?
Entitlement depends on the facts and the record. Common categories of claimants include:
Former owners (or the owner’s estate if deceased)
Heirs (when the former owner has died)
Assignees (when a valid assignment exists)
Other parties asserting claims that must be addressed in the special proceeding (especially where adverse claims are asserted)
This is also the practical reason surplus is sometimes deposited with the clerk: there may be multiple plausible claimants, and the statute provides a process to resolve entitlement.
Related Guides:
5) Surplus funds vs. “unclaimed property” (NCCash)
Foreclosure surplus typically starts as money held by the Clerk of Superior Court under § 45-21.31. Separately, North Carolina’s unclaimed property laws provide that property held by a court is presumed abandoned one year after it becomes distributable if unclaimed.
If foreclosure surplus is ultimately handled through the State’s unclaimed property system operated by the Office of the State Treasurer of North Carolina. North Carolina’s Unclaimed Property Program (NCCash) provides a public search tool for unclaimed property held by the State Treasurer: https://www.nccash.gov/.
Next Steps
Surplus funds cases often look simple on the surface—there’s money left over after a foreclosure sale—but the right outcome depends on where the funds are being held, who the law recognizes as entitled to claim them, and whether competing claims must be addressed through the special proceeding process. If you believe a North Carolina foreclosure sale may have produced surplus funds, contact our firm to discuss the facts of your file and the county where the sale occurred. We can help you confirm where the funds are being held, identify the lawful claimant(s), and outline the next steps for pursuing release of the funds.