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Tennessee foreclosure surplus funds: is money owed to you?

When a home sells at foreclosure for more than the debt, the extra does not just vanish. It may belong to the former owner. Here is how surplus funds work in Tennessee, where the money goes, and how to claim what is yours without paying a recovery company a big cut.

By Patrick Yuri Armour, Licensed Tennessee Auctioneer·Updated July 2026

What surplus funds are

At a Tennessee foreclosure (trustee) sale, the winning bid sometimes comes in higher than the total debt, fees, and costs. That leftover is called surplus funds (or excess proceeds). It does not go to the bank as a bonus. After everyone ahead of you is paid, the remainder belongs to the former owner.

The order the money is paid out
  1. Costs of the sale (trustee fees, advertising, etc.)
  2. The foreclosing lender's debt
  3. Any junior lienholders, in the order they were recorded
  4. The former owner gets whatever is left

Tennessee does not have a single statute that scripts this for bank foreclosures; distribution follows the deed of trust and long-standing law. For court-run (chancery) sales, the surplus rule is written down: anything over the debt goes to the debtor or their other creditors.[1]

How the money reaches you

After a trustee sale, the trustee holds the surplus. If it is clear who is owed what, the trustee can pay it out. When more than one party might have a claim (a junior lienholder and the former owner, for example), the trustee cannot decide who wins, so they deposit the money with the Chancery Court and let a judge sort it out. In Tennessee that court office is the Clerk & Master of the county where the property sits.[2]

Start by contacting the Clerk & Master of the Chancery Court in your county, and the trustee firm that ran your sale. Your county page lists the Clerk & Master for the ten largest Tennessee counties.
A trap to avoid
Some county websites post a "Motion to Claim Excess Sale Proceeds" form. Read it carefully: those forms are almost always for delinquent property-tax sales, which are a different process with a different statute, not bank foreclosures.[3] If your money came from a mortgage foreclosure, the tax-sale form is not your form. Ask the Clerk & Master which process applies to you.

If nobody claims it: the state holds it for you

Surplus that sits unclaimed does not disappear. Money held by a court is treated as abandoned about a year after it becomes payable, and is then sent to the Tennessee Department of Treasury, Unclaimed Property Division.[4] That one-year mark is a handoff, not a deadline that forfeits your money, you can still claim it after it moves to the state.

You can search for and claim unclaimed property from the state for free at ClaimItTN.gov. There is no fee to search or to claim your own money.[5]

Watch out for 'surplus recovery' companies

If your home sold with surplus, you may get letters or calls from companies offering to "recover" your money for a percentage, often 20 to 40 percent. Before you sign anything, know two things.

1. Once the money is with the state, the fee is capped
Tennessee caps what a locator can charge to recover property already held by the Treasurer at 10 percent (or $50, whichever is greater), and any such agreement signed within two years of the money reaching the state is void.[6] So a 30 percent offer to claim money the state is already holding for you is not enforceable in Tennessee.
2. Only a lawyer can file your claim in court
In Tennessee, drafting and filing a court claim, or representing you in the proceeding, is the practice of law. A non-attorney who does that for a fee is breaking the law.[7] A locator can tell you money exists; a licensed Tennessee attorney is who actually pursues a disputed claim.

The better outcome: don't leave surplus behind in the first place

Surplus funds are what is left after the courthouse auction takes its cut, and a courthouse sale almost always clears well below what your home is worth. If you still have time before the sale, selling the home yourself through a marketed auction usually puts far more of your equity in your pocket, directly at closing, than chasing scraps afterward. That is what FALCO helps Tennessee homeowners do, at no cost to you.

Sources: Tenn. Code Ann. § 21-1-803 (chancery-sale surplus); Title 66, Ch. 29 (Uniform Unclaimed Property Act, §§ 66-29-105, 66-29-176); § 67-5-2702 (tax-sale excess proceeds); §§ 23-3-101 and 23-3-103 (unauthorized practice of law); Tennessee Department of Treasury. This is general information, not legal advice. Talk to a licensed Tennessee attorney about claiming surplus in your specific case.

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This page is general information about Tennessee foreclosure, not legal, tax, or financial advice, and not a promise about any outcome. Every situation is different. For advice specific to your circumstances, consult a licensed Tennessee attorney, a HUD-approved housing counselor, or a licensed professional. FALCO is not a government agency and is not affiliated with, or approved by, any government program or your mortgage lender. FALCO does not buy your home, does not charge homeowners or take upfront fees, and does not promise to stop, delay, or cure any foreclosure. FALCO helps homeowners sell through a marketed auction run by a licensed Tennessee auction firm.

Keep reading
How the Tennessee foreclosure process works →Can you postpone the sale? →Clerk & Master contacts for your county →Sell before the sale: free 15-min call →