Who Can Claim Surplus Funds After a North Carolina Foreclosure?

When a foreclosure sale produces money left over after the required payments are made, the remaining balance is commonly called surplus funds (sometimes “excess proceeds”). North Carolina law explains how foreclosure sale proceeds are applied and provides that, in certain situations, surplus funds are paid into the Clerk of Superior Court in the county where the sale occurred. (N.C.G.S. § 45-21.31.)

When surplus is held by the clerk under § 45-21.31, a person claiming an interest can bring a special proceeding under N.C.G.S. § 45-21.32 for the clerk to determine entitlement.

This post is focused on one question: who can legally claim the surplus—and why multiple parties can have competing claims to the same fund. (Separate posts address how to file the petition, heirs’ proof issues, and lienholder-specific analysis.)

The short answer

Depending on the record and the facts, surplus funds may be claimed by:

• Former owner(s) (including co-owners)

• The owner’s estate or heirs/devisees if the owner is deceased

• A valid assignee of the owner’s rights

• Lienholders whose claims may continue in the surplus (for example, junior deeds of trust, judgment liens, and tax liens), in their order of priority

Why more than one party may have a valid claim

Surplus funds often attract multiple claims because foreclosure wipes out certain interests in the real property, but the law can allow those interests to be asserted against the proceeds instead. That is why the clerk process exists: the clerk can determine entitlement and priority based on the record and the evidence presented.

1) Former owners and co-owners

If surplus remains after all superior claims are satisfied, the record owner(s) are often the recipients of what remains.

Where there are multiple owners, the entitlement analysis commonly turns on:

• how title is held in the public record (for example, joint ownership versus other forms), and

• whether any record changes occurred before the sale became final.

2) Estates, heirs, and devisees when the owner is deceased

North Carolina’s foreclosure statute anticipates that surplus may be paid into the clerk’s office when an owner is deceased and conditions exist that prevent direct payment. (N.C.G.S. § 45-21.31.)

When the owner is deceased, claims are commonly pursued by:

• a personal representative of the estate (once appointed), and/or

• the heirs/devisees, depending on the estate posture and what proof is required in the county where the funds are held.

Related guide (internal link): Heirs Claiming Surplus Funds in NC: Proof and common issues

3) Assignees claiming through a written assignment

Some claims are pursued through a written assignment of the owner’s rights to the surplus. In those files, the clerk will typically expect documentation showing:

• the assignor had rights to assign, and

• the assignment is valid and clearly connects to the specific foreclosure/property record.

Assignments can raise practical questions that do not come up in owner/heir claims (chain of assignment, clarity of what was assigned, signatures, and whether the assignment covers the specific surplus at issue).

4) Lienholders and other parties with recorded claims

Surplus is often the subject of competing claims because liens attached to the property may be asserted against the surplus fund depending on attachment and priority. As a practical matter, this is one of the main reasons surplus funds get paid to the clerk—there may be more than one plausible claimant, and the record must be reviewed to determine who gets paid, and in what order.

Common lien-based claimants include:

• Junior deeds of trust (second mortgages, HELOCs)

• Judgment creditors with properly docketed liens (for example, unpaid credit cards, auto loans, medical bills), if the judgment became a lien against real property in the county

• Tax-related claims (state and federal), depending on attachment and priority

Related guide (internal link): Lienholders and Foreclosure Surplus in North Carolina

5) How competing claims are resolved

If surplus funds have been paid into the clerk’s office under § 45-21.31, a claimant may institute a special proceeding under § 45-21.32. The statute also requires that certain other claimants be made parties—particularly:

• those who filed a notice of claim with the clerk, and

• those the petitioner knows assert a claim.

If an answer raises issues of fact, the statute provides a contested-claim path that can change how the case proceeds.

6) What if no one claims the money?

Separately from the foreclosure statutes, North Carolina’s unclaimed property laws address when certain property is treated as unclaimed. If funds are ultimately reported into the State’s unclaimed property system, the State Treasurer’s program provides a public search tool at NCCash (nccash.gov).

A quick self-check: which category are you?

• You were on title at the time of foreclosure: start with the owner/co-owner category.

• The owner died: determine whether there is a personal representative and whether you are an heir or devisee.

• You have an assignment: confirm it clearly assigns the right to the specific surplus proceeds tied to this foreclosure.

• You are a creditor or lender: identify whether you have a recorded lien and where it falls in the priority stack.

Contact us for a free consultation

If you believe you (or your family) may be entitled to surplus funds from a North Carolina foreclosure—whether as a former owner, heir, assignee, or lienholder—contact our firm to review the foreclosure details, identify the likely claimants, and determine the most efficient path to a distribution order.