How to avoid foreclosure in Kentucky

How foreclosure works in Kentucky, step by step

1. Missed payments and early contact

   Under federal rules, a servicer generally cannot start a foreclosure case until you are more than 120 days behind. Kentucky law does not add its own pre-foreclosure notice. Use this time to call your servicer's loss mitigation department and reach a housing counselor or legal aid.

   12 C.F.R. § 1024.41(f)

2. The lender files a lawsuit

   The lender files a complaint in the circuit court of the county where the home is located, and you are served with a summons. You have 20 days after you are served to file a written answer. If you do not answer, the lender can ask for a default judgment.

   Ky. R. Civ. P. 12.01

3. Judgment and order of sale

   If the judge rules for the lender, the court enters a judgment that says how much you owe and orders the home sold. The judgment can also include a personal judgment against you for the debt. The case is referred to the master commissioner, and the judgment and order of sale must be served on every party who is not in default.

   KRS 426.005; Ky. AP Part IV, § 4(2)

4. Appraisal and notice of sale

   Before the sale, two disinterested people with real estate experience appraise the home, and the written appraisal is filed in the court record. The sale must be advertised in a newspaper at least once, between 7 and 21 days before the sale date. Write down the appraised value, because it decides whether you will have a right to redeem.

   KRS 426.520; KRS 426.560; KRS 424.130; Ky. AP Part IV, § 5(2), (3)

5. Master commissioner's sale

   The commissioner sells the home at public auction, usually at the courthouse, within 90 days after the order of referral (the court can add up to 30 days for good cause). The buyer pays cash or puts 10% down with the rest due in 30 days. Until the sale happens, you can still try to work out a deal with your servicer, though the servicer does not have to agree.

   KRS 426.700; Ky. AP Part IV, § 5(1), (4)

6. Report of sale and confirmation

   The commissioner files a report of sale within 3 business days, and the report must state the appraised value. If no one objects, the judge can confirm the sale, and the commissioner delivers a deed to the buyer after confirmation and payment. If you think the sale was not handled properly, talk to a lawyer right away about filing an objection.

   KRS 426.540; Ky. AP Part IV, § 5(5), (6)

7. Redemption (only in some cases) and moving out

   If the home sold for less than two-thirds of its appraised value, you have 6 months from the sale to buy it back. Even then, the buyer gets an immediate writ of possession, so you may have to move during those 6 months. Kentucky legal aid explains that the new owner gives 10 days' written notice and can then get a writ of possession for the sheriff to remove you.

   KRS 426.530

Kentucky foreclosure deadlines to know

These are the periods written into the law. Your own dates are on the notices you received. If a notice and this page disagree, trust the notice and ask a counselor or lawyer.

Your rights as a homeowner in Kentucky

Other Kentucky protections

• Appraisal before the sale

  The home must be appraised by two disinterested people before the commissioner sells it, and the written appraisal is filed in the court record before the sale. That appraisal is what the two-thirds redemption rule is measured against.

  KRS 426.520; Ky. AP Part IV, § 5(2)

• Two-thirds rule and 6 month redemption

  If the home sells for less than two-thirds of its appraised value, you can redeem it within 6 months by paying the sale price, 10% yearly interest and the buyer's reasonable upkeep costs.

  KRS 426.530

• No personal judgment without real service

  If you were only constructively summoned and never appeared in the case, the court cannot enter a personal money judgment against you. The home can still be sold.

  KRS 454.165

• No advance fees for foreclosure help

  Anyone who charges for foreclosure assistance or mortgage debt negotiation in Kentucky is a debt adjuster. They cannot collect a fee on mortgage debt before all promised services are finished, and you can cancel the contract within 14 days.

  KRS 380.010; KRS 380.040(2)(d); KRS 380.060

Kentucky mortgage assistance programs

If the home is sold for more than you owe

If the home sells for more than what is owed on the judgment plus costs, the lender does not keep the extra. The sale money is paid out by order of the circuit court. Other lienholders named in the case can be paid from it, but only after they prove their claims in the case. Money left after that belongs to the former owner. Ask the master commissioner's office or the circuit court clerk how to request any surplus in your case, and keep your mailing address current with the court.

KRS 426.006; KRS 426.500

Ways to avoid foreclosure

Most of your options come from federal rules and from whoever owns or insures your loan, so they work the same way in Kentucky as anywhere else. What changes by state is how much time you have to use them.

• Repayment plan
• Forbearance
• Payment deferral or partial claim
• Loan modification
• Reinstatement
• Short sale
• Deed in lieu of foreclosure
• Chapter 13 bankruptcy