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Recovering Surplus Funds after a Sheriff's Sale in NJ - What Every Investor, Loan Servicer, and Judgment Creditor Needs to Know
By John D. Krohn on December 11, 2018

Ineffective legal oversight during and after a senior lien foreclosure can lead to mistakes and delays in the process to recover surplus funds.  To minimize these delays, it is important to have a plan of action that spans through the many legal steps from sheriff’s sale to receipt of funds. Unfamiliarity with the process and problems with the pleadings and supporting documents can result in delayed recovery or even no recovery at all.  Having proper guidance and a comprehensive plan for navigating this process is key to recovering funds quickly and effectively. 

If surplus funds remain after a sheriff’s sale, meaning both the foreclosing Plaintiff and the Sheriff have been satisfied, it’s important to be ready with an application (by formal motion) to the Superior Court. The sheriff sends the surplus to the Trust Fund Unit (“TFU”), once the funds are available. The TFU is considered a “temporary” depository, but funds deposited there may remain there indefinitely until they are claimed.

After the sheriff’s sale, inquiries can be made to the TFU regarding the existence and amount of any surplus funds and, if funds are available, the applicant seeking to recover the funds can get started immediately. Any party or parties with an unsatisfied interest in the land (mortgage, lien, judgment, ownership interest, etc.) can seek to recover surplus funds, whether they were named in the judicial proceeding that led to the sheriff’s sale or not.

The successful claimant must be able to establish actual priority over the claims, liens, and encumbrances of all others. To do this, a claimant must be familiar with the subtle nuances in this area of law and understand relevant compliance and statutory requirements to prepare a formal motion with the proper notice, certification(s) in support, evidentiary materials, and a proper proposed order. Parties with the highest priority of liens have the best chances of securing the surplus funds.

If the TFU deems the proposed order to be sufficient, they will mark it verified and send the marked copy back to the applicant. Then, the motion must be filed on the Court’s docket with proofs of service. The Court will review the motion, along with any opposition (if applicable), and issue an order granting or denying it. The order granting the motion for surplus funds must be submitted back to the TFU for processing before they will issue a check.

All of the steps in the process need to occur in an appropriate timeframe and with complete and accurate information.  Inadequacies in the legal pleadings may cause the formal motion to be denied by the Court, thus delaying the issuance of the funds or, in the worst-case scenario, preventing recovery entirely.

If you would like assistance recovering surplus funds or evaluating recovery options, or if you have a specific question regarding the surplus funds recovery process in New Jersey, contact Attorney, John D. Krohn in the Creditor’s Rights Department at Parker McCay, P.A. at (856) 810-5815, or email jkrohn@parkermccay.com.

The content of this post is for informational purposes only and should not be construed as legal advice or legal opinion.  You should consult a lawyer concerning your specific situation and any specific legal question you may have.

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