Kentucky Foreclosure Laws



How are mortgage liens treated in Kentucky?

Kentucky is known as a lien theory state where the property acts as security for the underlying loan. The document that places the lien on the property is called a mortgage. Power of sale foreclosures through a deed of trust are not permitted.


How are Kentucky mortgages foreclosed?

In Kentucky, the lenders go to court in what is known as a judicial foreclosure proceeding where the court must issue a final judgment of foreclosure. The property is then sold as part of a publicly noticed sale. A complaint is filed in court along with what is known a lis pendens. A lis pendens is a recorded document that provides public notice that the property is being foreclosed upon. Generally, a party has twenty (20) days to file an answer to the complaint, and if this is not completed, a default is entered.


What are the legal instruments that establish a Kentucky mortgage?

The documents are known as the mortgage, note, and in a commercial transaction, a security agreement. Sometimes the mortgage document is combined with the security agreement. A mortgage is filed to evidence the underlying debt and terms of repayment, which is set forth in the note.


How long does it take to foreclose a property in Kentucky?

Depending on the court schedule, it usually takes approximately 150 days to effectuate an uncontested foreclosure. This process may be delayed if the borrower contests the action, seeks delays and adjournments of hearings, or files for bankruptcy. The lender may take possession immediately in the event that a borrower abandons a property during the foreclosure process. The lender must usually advertise a foreclosure sale for three (3) weeks prior to the sale date.


Is there a right of redemption in Kentucky?

Yes, Kentucky has a restricted statutory right of redemption, which allows a party whose property has been foreclosed to reclaim that property by making payment in full of the sum of the unpaid loan plus costs and 10 percent interest. There is a time limit to undertake such redemption of one (1) year and this right of redemption is only available if the foreclosure sales price is less than 2/3 of the appraised value. The mortgagor's right to redemption is marketable and can be sold to a third party.


Are deficiency judgments permitted in Kentucky?

Yes, a deficiency judgment may be obtained when a property in foreclosure is sold at a public sale for less than the loan amount that the underlying mortgage secures. This means that the borrower still owes the lender for the difference between what the property sold for at auction and the amount of the original loan. Deficiency judgments are only available in the event that the borrower was personally served with the foreclosure complaint and/or was served but did not file an answer.


What statutes govern Kentucky foreclosures?

The laws that govern Kentucky foreclosures are found in various sections of Kentucky Revised Statutes (KRS) Chapter 426 (Enforcement of Judgments).


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