Foreclosures in Kentucky are court-ordered sales conducted by the circuit court master commissioner. Consensual liens like a mortgage voluntarily give the lienholder an interest in the property. Non-consensual liens include tax, mechanic, and judicial liens, which also allow the foreclosure. The Kentucky Foreclosure Law Process for consensual and non-consensual liens are similar. We can strip non-consensual liens if it impairs your equity. We can also strip a consensual lien if there is no equity for the lien to attach. Lenders file Kentucky foreclosures in the county of the property, not the owner’s county.

The Lis Pendens Notice

Usually, a mortgage company files a lis pendens, which is a notice of pending litigation. A Lis Pendens gives notice to any potential buyer that the property has litigation pending. This notice prevents the owner from transferring the property.

Kentucky Foreclosure Law Process

Kentucky Foreclosure Law Process

A Lis Pendens merely warns potential buyers the property has a pending lawsuit. If the lienholder does not file the Lis Pendens, a good faith purchaser may take the property free of a  mechanic, trustee, or judgment lien. If someone purchases the property after a Lis Pendens, the buyer had notice of the pending litigation, and the foreclosure continues.

The Foreclosure Complaint

Filing the foreclosure complaint with the circuit court only starts the foreclosure. The Plaintiff must include all parties that may have an interest in the property.  The necessary parties include the county sheriff for the interest in any property taxes, spouse, mortgages, or judgment liens. Typically a Plaintiff will perform a title search to find any party that may have an interest in the property.  The failure to sell the home properly may put the Commissioner at risk of a lawsuit.  The Commissioner usually is very careful to follow proper procedures.

The Plaintiff must plead in the complaint that the homeowner is in default. A quality pleading includes the basis for foreclosure, such as nonpayment. Also, the note and mortgage frequently state the rights and responsibilities of the lien holder and homeowner. In the foreclosure complaint, the lienholder must explain or claim:

  1. The interest the Plaintiff has in the property.
  2. That the owner is in default.
  3. An accurate legal description of the property.
  4. A request for a judgment against the owner and sale of the property.

Keep the Home or Let it Go Back

When the mortgage company files the foreclosures filed, the homeowner should first sit down and look at the home objectively. If the home has equity, the home fits the needs of the homeowner, and the mortgage is at a reasonable rate, the homeowner wants typically to keep the house. You can file a Chapter 13 bankruptcy to catch up on the mortgage and stop the foreclosure. The homeowner can work on a mortgage modification or workout with the bank while the home is in Chapter 13. Filing an answer and discovery also allows the homeowner time to pursue alternatives.

If the home is not a good deal, then the homeowner typically wants to give himself time in the house so the family can make a smooth transition to a new home. It is also essential to avoid damage to your credit, a deficiency, and an income tax debt.

If the house must go back, the homeowner typically wants to hire an attorney to file an answer to this lawsuit. Discovery should follow no more than two months after the answer. Finally, the debtor files a Chapter 7 bankruptcy to avoid the deficiency and income tax debt.

Kentucky Foreclosure Law Process for filing an Answer and Discovery

There are over 120 different primary defenses, and the mere filing of an answer may delay the foreclosure process for years. Asking for discovery or a jury trial may postpone the matter for much longer. Regularly just filing an answer will delay the sale for about six months.  Filing discovery will often delay the foreclosure for another six months. The Defendant should file discovery within two months after the answer.   Together an answer and discovery often delay the sale for a least a year.

When a Kentucky property only has twenty days after service with the complaint to file the answer.  A Default judgment happens when the Defendant fails to file a response. You may or may not be allowed additional time to file your response by showing a reason for the delay.  But a judge does not have to allow additional time. Most homeowners call the mortgage company, fail to file an answer, and then the mortgage company obtains a default judgment and sale. By failing to file the answer and dispute the complaint, the Defendant admits the facts.

Homeowners may also attempt to file an answer with the Court.  Due to their lack of knowledge, they will often admit they owe the debt, fail to raise defenses, and the property is often quickly sold. Attorneys for the mortgage company will promptly move for summary judgment and then sell the property. The Summary Judgment motion is a tool for a quick judgment when an answer admits enough facts to avoid a trial.  Default and Summary judgments are tools to win the lawsuit quickly. These motions are filed with supporting affidavits and evidence such as payment history, note, and mortgage. Essentially they state there are no issues left to be argued.

Kentucky Foreclosure Law Process for Default and Summary Judgments

Obtaining a default judgment can happen within 30 days. A sale can happen in less than 90 days if an answer is not filed. Mortgage companies will often talk about your right to save the home with a mortgage modification. While they talk, they are selling the home. By failing to file an answer, the homeowner gives up several rights. The mortgage company will file a motion for summary judgment if an answer fails to raise issues and claims. The home will then sell in about 90 days.

The judge issues a Summary judgment when there are no facts in dispute and left to be decided. If the facts are clear and not in dispute, the judge only has to apply the law and decide the case. The Plaintiff immediately wins when the Defendant fails to properly raise factual and legal issues and simply admits the debt is owed. You must have both legal and factual issues to be decided to delay foreclosure. It takes time to sell a home or avoid foreclosure with a mortgage modification. There are other methods to resolve a default like a workout agreement, but all of these tools take time.

Kentucky Foreclosure Law Process for Commercial Foreclosures and Receivership

In Commercial foreclosures, the Court will often appoint a receiver. Receivers take over and operate a business or property until the sale. The motion for a receiver is just like a summary judgment motion. If the lender can prove the lender’s right to possess the real property,  KRS 425.600 allows the Court to appoint a receiver. The Receiver is selected to prevent the property or profits from being stripped, stolen, wasted, or destroyed injured. Commercial loans often allow receivers who report to the Court while they sell or manage assets.  The sales usually are worse than bankruptcy. Reciever sales leave the debtor less property, more in debt, without control over the sale, and fewer rights.

The Commissioners Foreclosure Recommendations and sale

Circuit Courts will often send the case to the Commissioner, who will make recommendations on issues to the Court. The Commissioner usually decides default and Summary judgments. The Court only has to agree with the Commissioner’s recommendations to enter a judgment. The deed transfers to the buyer at closing but the buyer has an interest in the property as soon as the auction is held. The Commissioner advertises the sale in an area newspaper once a week for three weeks and at the courthouse. These Commissioner Sales are at the Kentucky International Convention Center, Second Floor, 221 South 4th Street, at 10:00 AM, on Tuesdays according to the Commissioner’s sale calendar.


When the Commissioner receives property for sale, the property will be appraised by two disinterested parties. This appraisal determines the value and redemption amount of the property. The property owner cannot redeem the property if it sells for more than the redemption value. Offering any bid for the redemption value extinguishes the property owner’s right of redemption.

Stopping the sale Timing is everything.

The homeowner can file a Chapter 7 or Chapter 13 bankruptcy up to the sale date, but after the sale date, the owner loses any interest or rights to the property. Failing to file a Chapter 7 or 13 before the sale triggers the IRS debt. The homeowner will owe for any 1099-c filed after the sale and transfer. Filing a Chapter 7 or 13 before the sale will not only avoid the tax debt and any deficiency; it will also delay the foreclosure sale from coming back up for about six months. During bankruptcy, the homeowner can again try a mortgage modification or workout.

The purchaser makes a deposit, and the Commissioner files a report with the judge, asking approval of the sale. The Defendant continues to possess the home until the purchase is complete, and the master commissioner issues a deed. After the sale, the master commissioner will pay his fees, the property taxes, and the remaining funds will go the creditors in the rank of their priority. Funds first go to property taxes, second to Mortgages, third to judgment liens, and the remainder to the homeowner.

Deficiency Judgments

The lienholder reports the deficiency in accord with Internal Revenue Service regulations. When he files the 1099-c it creates a tax debt for the homeowner. The lienholder can obtain a deficiency judgment against the Defendant and collect the amount owed after the sale. It is becoming more and more common to see debt buyers purchasing these deficiency debts and suing for the deficiency with interest and attorney fees. This judgment is valid in Kentucky for up to 20 years. These judgments are repeatedly renewed every 20 years and collected. If you have a foreclosure call our law firm.