If you’re a Kentucky homeowner who’s fallen behind on your mortgage payments, you might be wondering what happens during a foreclosure in your state. Kentucky foreclosures go through a judicial process, which means the courts handle them. You’ll learn about the foreclosure when you receive a summons and complaint, and you’ll get a certain amount of time to file an answer with the court. You also have certain rights under federal and state law.
Read on to learn about your legal rights during the process, including when foreclosure will start, how much time you get to respond to the complaint, how long you get to redeem the home after the foreclosure sale, and more.
Again, foreclosures in Kentucky are judicial, which means the foreclosing bank has to file a lawsuit against you in court to foreclose. Here's how the process generally works.
Under federal law, in most cases, a loan servicer must wait until you're over 120 days' delinquent before filing the lawsuit to officially start the foreclosure process. This preforeclosure period is a good time to submit an application for a loss mitigation option (an alternative to foreclosure), like a loan modification, to your servicer.
Federal law also provides other protections to homeowners facing a foreclosure.
In Kentucky, you’ll learn about the foreclosure lawsuit when you’re served a summons and complaint. You’ll get 20 days after service to file a response to that complaint. (Ky. R. Civ. P. 4.02).
Whether or not you file a response is up to you. If you don’t file an answer, the bank will probably ask for a default judgment (an automatic win) from the court. In many cases, the court will send the matter to the master commissioner, who is a court-appointed official, for a foreclosure recommendation. If the judge agrees with the commissioner's recommendation and signs the default judgment, the bank wins the case. The court will then authorize the bank to sell your home.
But if you do answer the suit, you'll have the opportunity to tell a judge just why you think you have a legal right to keep your house and that foreclosure is not warranted. The bank will likely file a motion asking the court to find for the bank (a summary judgment motion). Again, the commissioner will review the motion. If the commissioner recommends that the court should grant the motion—and the court agrees—the court will enter a judgment in favor of the bank. The commissioner will then administer the foreclosure sale. Before the sale, a notice of sale must be posted on the courthouse door (and three other places) and published in a newspaper. (Ky. Rev. Stat. Ann. §§ 426.200, 424.130, 426.560). Two appraisers will complete a drive-by inspection of the property.
Kentucky law provides special protections against foreclosure to some military servicemembers and to borrowers who take out a “high-cost home loan.” (A high-cost home loan is a loan that has particular characteristics, like points and fees that are greater than a specified amount.)
Protections against foreclosure for certain military service members. Kentucky law extends the protections of the federal Servicemembers Civil Relief Act to members of the state national guard called to active duty service under Title 32 of the United States Code, or ordered to state active duty by the governor for a period of 30 days or more. (Ky. Rev. Stat. Ann. § 38.510).
Protections regarding high-cost home loans. Before it can file a complaint to foreclose a high-cost home loan, the foreclosing party must provide a notice of default to the borrower that gives 30 days to cure the default and reinstate the mortgage. (Ky. Rev. Stat. Ann. § 360.100).
“Reinstating” is when you catch up on the missed payments, plus fees and costs, in order to stop a foreclosure.
Under Kentucky law, the borrower doesn’t get the right to reinstate before the sale—unless the loan is a high-cost home loan (see above). But the terms of the mortgage contract might give the borrower the ability to reinstate the loan or the bank might agree to let you complete a reinstatement.
Some states allow the borrower to redeem the home within a specific period of time after a foreclosure.
In Kentucky, if the home sells for less than two-thirds of its appraised value at the foreclosure sale, the borrower gets six months to redeem the property. (Ky. Rev. Stat. Ann. § 426.530).
When the total mortgage debt exceeds the foreclosure sale price, the difference is called a “deficiency.” Some states allow the bank to seek a personal judgment, called a “deficiency judgment,” against the borrower for this amount, while other states prohibit deficiency judgments with what are called anti-deficiency laws.
Kentucky law generally permits the foreclosing party to get a deficiency judgment. (Ky. Rev. Stat. Ann. § 426.005). But a personal judgment is not allowed against a defendant who is constructively summoned, and who has not appeared in the action. (Ky. Rev. Stat. Ann. § 454.165).
In Kentucky, the purchaser from the foreclosure sale is entitled to possession of the property after ten days' notice to the former owners. Then, the purchaser can get a writ of possession from the court. (Ky. Rev. Stat. Ann. § 426.260).
If you want to learn more about the foreclosure process in Kentucky or want to find out if you have any potential defenses to a foreclosure, consider talking to a foreclosure lawyer.
It’s also a good idea to make an appointment to speak to a HUD-approved housing counselor, especially if you want to learn about different loss mitigation options.