LOUISVILLE, Ky. - When a Kentucky home sells at a Master Commissioner's auction for more than the debt against it, the money left over belongs to the former homeowner. Many never learn it exists. The funds stay in the court's account until someone files a motion asking a judge to release them, and if nobody does, the money is eventually transferred to the Kentucky State Treasurer.
Nick C. Thompson, a Louisville bankruptcy and foreclosure attorney, is one of the few Kentucky attorneys who regularly files the motion for distribution that releases these funds. He charges a flat $1,500 for the motion and order, paid up front rather than deducted from the homeowner's check.
"The money is already theirs," Thompson said. "It is sitting in a court account with their name attached to it. The problem is that nobody tells them, and the court cannot release a dollar without a judge's signature on an order."
Not every foreclosure leaves money behind, and recovery is never automatic. A surplus exists only if the sale price exceeded every valid claim against the proceeds, including the foreclosing party's debt and attorney fees, any second mortgage, judgment liens, unpaid property taxes, IRS liens, and the Commissioner's own fees and costs. Releasing the money requires a motion for distribution establishing that all known claims have been paid and that no other party is claiming the funds, followed by an order signed by the Circuit Court judge. A competing lienholder can object, and the available balance can change while claims are still being paid.
Surpluses arise for two main reasons. Under KRS 426.530, a sale that brings less than two-thirds of a home's appraised value gives the former owner six months to redeem the property, so lenders typically bid at least that much to cut off the redemption right. When the mortgage balance is well below that bid, the difference becomes surplus. Surpluses are also common when a foreclosure is brought by a homeowners association, a condominium association, or a tax authority rather than a mortgage lender. In those cases no lender bids the price up, and the lien being collected may be a few thousand dollars against a home worth far more.
Timing matters. Under KRS 393A.040, funds held by a court may be sent to the Kentucky State Treasurer one year after they become distributable, and must be sent within five years. The money can still be claimed afterward through the Treasurer's unclaimed property process, but that route is slower and harder to document.
Former homeowners are often contacted within days of a sale by recovery companies that monitor public court dockets. Thompson said many of the contracts his office has reviewed take half of the surplus or more. These firms are not law firms and cannot file motions or appear before a judge.
"On a $40,000 surplus, a company taking half keeps $20,000," Thompson said. "Our fee is $1,500. The arithmetic is not complicated, and homeowners deserve to see it before they sign anything."
Thompson's office files these motions in Jefferson, Oldham, Bullitt, Spencer, Nelson, and Meade counties, and handles other Kentucky counties on request. The filings rarely require a court appearance.
Kentucky homeowners whose property has been sold at a Master Commissioner's auction can learn more at https://www.bankruptcy-divorce.com/claim-kentucky-commissioner-foreclosure-surplus-funds/ or call (502) 625-0905.
About Nick Thompson Bankruptcy & Foreclosure Attorney
Nick C. Thompson has practiced law since 1988 and has represented Kentucky clients since 1991. His Louisville practice covers Chapter 7 and Chapter 13 bankruptcy, foreclosure defense, and tax-related bankruptcy matters. The office is located at 800 Stone Creek Parkway, Suite 6, Louisville, Kentucky 40223.
Email: Bankruptcy@Bankruptcy-Divorce.com
Kentucky Bar Association member #83381.
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Media Contact
Name
Nick Thompson Bankruptcy & Foreclosure Attorney
Contact name
Nick C. Thompson
Contact phone
(502) 625-0905
Contact address
800 Stone Creek Parkway, Suite 6
City
Louisville
State
KY
Zip
40223
Country
United States
Url
https://www.bankruptcy-divorce.com/
