Mortgage Excess Proceeds and Divorce: Who Gets the Funds?

Divorce can be a complicated process, especially when it comes to dividing assets like a home. But what happens if the property is foreclosed and sells for more than what was owed? Who gets the mortgage excess proceeds—the former spouses or one party?

The answer depends on several factors, including state laws, divorce settlements, and property ownership rights. In this guide, we’ll break down how foreclosure surplus is typically handled in divorce cases.

What Are Mortgage Excess Proceeds?

When a foreclosed home sells at auction for more than the remaining mortgage balance, the extra money—called mortgage excess proceeds—belongs to the former homeowner(s).

For example:

🏡 Mortgage balance owed: $150,000

💰 Home sells for: $200,000

📈 Surplus funds available: $50,000

These excess proceeds are typically paid to the former homeowner(s) listed on the mortgage or deed. But in cases of divorce, things get more complicated.

How Divorce Impacts Mortgage Excess Proceeds

Divorcing spouses must determine how to divide the foreclosure surplus based on:

1. Property Ownership (Title and Deed)

Ownership rights play a big role in who gets the funds. Ask these key questions:

🔹 Is the home jointly owned? If both spouses are on the deed, the proceeds may be split equally—unless the divorce decree states otherwise.

🔹 Is the home in one person’s name? If only one spouse was listed as the owner, they may be entitled to the full amount.

💡 Tip: If a divorce was finalized before the foreclosure, check the divorce decree to see if the court awarded the home (and any potential proceeds) to one party.

2. Divorce Settlement Agreements

Many divorces include property division agreements, which outline how assets should be split. If the agreement specifically states how foreclosure proceeds should be handled, that ruling will generally apply.

Some common scenarios include:

✔ One spouse receiving the full amount as part of the divorce settlement.

✔ Splitting the proceeds based on a percentage agreed upon during the divorce.

✔ Using the funds to pay off joint debts before dividing the remainder.

3. Community Property vs. Equitable Distribution States

State laws can affect how mortgage excess proceeds are handled after a divorce.

📍 Community Property States (e.g., California, Texas, Arizona)

• Assets acquired during the marriage (including the home) are typically split 50/50.

• If the home was jointly owned, both spouses may have a right to half the surplus funds.

📍 Equitable Distribution States (e.g., Florida, New York, Illinois)

• Property is divided fairly, but not always equally based on factors like income, contributions, and financial need.

• The court may decide one spouse is entitled to a larger share of the surplus funds.

4. Liens, Debts, and Legal Claims

Before either spouse receives mortgage excess proceeds, any liens, unpaid debts, or legal claims attached to the home must be paid off first.

Potential deductions may include:

📌 Outstanding mortgage balances (if any remain).

📌 Home equity loans or second mortgages.

📌 Judgments for unpaid debts (including divorce-related obligations like spousal support).

If a court order requires using the proceeds to cover shared debts, neither spouse may receive their expected share.

How Surplus Refund LLC Can Help

Recovering mortgage excess proceeds after a divorce can be complex, especially when legal agreements or state laws come into play. Surplus Refund LLC specializes in helping former homeowners—whether divorced or not—navigate the claims process and recover what they are owed.

We can help:

✅ Identify whether you have a valid surplus claim.

✅ Determine your rightful share of the funds based on ownership and legal agreements.

✅ Handle the claim process to ensure you receive your money quickly.

💬 If you or a former spouse may be entitled to mortgage excess proceeds, don’t wait! Contact Surplus Refund LLC today for a free consultation.