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  • Am I Entitled to Surplus Funds?

    Jun 05, 2018
    Entitled Surplus Funds
    Am I Entitled to Surplus Funds?
    in Foreclosure and Bankruptcy, California Real Estate, JT Legal Group Blog, Money Managment

    Am I Entitled to Surplus Funds?

    Many people in the state of California face foreclosure every year. Unfortunately, the process alone can be very stressful and confusing. In many cases, there is a possibility the foreclosed property equity could be returned to the owners of such property. In support of this claim, one can refer to the provision in California law that requires any leftover funds be granted to the former, foreclosed property owners.

    Surplus Funds

    A mortgage is null, or “voidable” after a foreclosure. Any equity in the property legally belongs to the homeowner. In addition to this factor, a foreclosure trustee is assigned to handle the sale of the property. Under California law, when a property is sold at an auction for more than what was the amount left on a mortgage, the additional balance is known as “surplus funds.” The previous owner of the property is legally entitled to obtain all the additional funds resulting from the sale of the foreclosed property.


    Most of the foreclosures that take place in California are nonjudicial. This means the foreclosure procedure occurs without a court having to be involved. The calculation of these funds involves analyzing the final sales cost, cost of the mortgage, as well as any arrears and all penalties associated with the sale. What remains after this foreclosure sale, is initially what the previous homeowner is legally entitled to obtain.


    Prior to a trustee being able to provide funds to the noticed person, this individual will be required to provide proof of their beneficial interest within the property. They must establish their security interest, as well as an obligation. Should someone provide a promissory note that is secured by a deed of trust, they must provide the original promissory note, as well as an assignment of beneficial interest. In addition, a noticed person must also provide a written claim of the funds to the trustee. This written claim must be executed under penalty of perjury.

    Depositing Funds

    Should a trustee not be able to determine who is legally able to claim such funds, then the trustee may deposit the funds at court. If the trustee is able to determine, then the funds can be deposited directly. When the surplus funds are deposited, the court will then be responsible for determining who can receive them, according to the law. In a case under California law, the foreclosing trustee is required to petition the court. This petition will be a formal request to deposit the funds with the clerk of the court. It is a requirement of California Civil Code sections 2924, which covers foreclosure procedures. This purpose of this procedure is so that the court can begin the process of determining how the funds should be handled in accordance with the law.

    Disbursement of Funds

    If the paperwork is correct, the petition submitted to the court by the foreclosing trustee will be granted. Once the court does this, such petition will order the funds from the property sale to be deposited with the court. Once this process is complete, the foreclosing trustee will be released and be free from anymore responsibilities regarding the matter. In addition, a hearing date will be established by the court to determine the disbursement of the funds.

    Claims Considered

    The overall petition process will take 90 days for the court to consider all claims that have been filed for the funds. All existing claims for the funds must be filed within 15 days prior to the date the hearing is scheduled to be held. The court's clerk will provide a written notice of the date and time of the hearing by first-class mail to all claimants. Only the claimants listed in the trustees' declaration with a specified address will be listed. During the hearing, the court will determine the distribution of the funds to each and all claimants who are legally entitled to receive them.

    Priority of Distribution

    California Civil Code section 2924 provides the priority of distribution of these particular type of funds. In addition, the following fees are also considered when distributing funds:

      Costs of Sale - All costs associated with the sale of the foreclosed property. This could involve the fees paid to a trustee as well as attorney and more.
      Obligations of Mortgage or Deed of Trust – The obligations associated with a mortgage or a deed of trust must be paid from any funds resulting from the sale of the foreclosed property.
      Outstanding Balance – Any and all outstanding balance obligations will be paid according to the order of priority. This includes any encumbrances, junior liens and more.
      Trustor or Trustor's Successor – Should the property be sold or transferred to another, the owner of record at the time of the trustee's sale, or vested owner, will be paid the funds according to the law.

    When a homeowner has experienced a foreclosure, the entire process and days that follow the sale, can be difficult to endure. Such experience can be made easier with the help of a trusted surplus funds attorney. These legal professionals are familiar with and understand the process involving a homeowner attempting to gain the funds they are legally entitled to receive. A competent law firm will know how to file a claim with a trustee and with the designated court system, as well as complete all corresponding paperwork that’s involved when achieving these funds for a homeowner. These legal professionals will also know how to file a wrongful foreclosure lawsuit, should violations of California’s foreclosure laws have occurred and more. For any questions, comments, or concerns you may have regarding your surplus funds, contact our firm immediately - we're here to help.

    Your free, no-obligation consultation with a knowledgeable attorney, regarding your unique situation, is available by calling:

    888-529-3111 Monday-Friday, 24 hrs a day, 7 days a week.

    Jack Ter-Saakyan, Esq.
    [NOTE: Attorney Advertising]: Nothing posted on this blog is intended, nor should be construed, as legal advice. Blog postings and hosted comments are available for general educational purposes only and should not be used to assess a specific legal situation. Nor does any comment on a blog post create an attorney-client relationship. The presence of hyperlinks to other third-party websites does not imply that the firm endorses those websites, their contents, or the activities or views of their owners.

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