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Judicial foreclosure available: Yes
Non-Judicial foreclosure available: Effectively, no
Kentucky has a rigid rule on foreclosures: no
out-of-court foreclosures are valid other than voluntary sales by the borrower.
A deed of trust sale, a power of sale clause in a mortgage or sale by a trustee
will not work in Kentucky. The only forced foreclosure sale that is permitted
is one pursuant to a court order. Also, common law or strict foreclosure is
forbidden in Kentucky. The lender must be prepared to engage in litigation to
foreclose in the state of Kentucky. Often the lender can win by default or
summary judgment but, if not, the case is tried to a jury.
Possession
On the other hand, if the borrower abandons the home,
the lender may obtain possession of the property once the borrower goes into
default. The lender may operate the property for the benefit of the borrower.
Any income produced goes to the lender, not the borrower, but will be credited
toward paying off what the borrower owes. If the borrower does not abandon the
home, the lender may not take possession until the court confirms the
foreclosure sale.
Redemption and Appraisal
Prior to a foreclosure sale, the property must be
appraised. If the actual foreclosure sale price is less than two-thirds of the
appraised value, then for one year after the sale the borrower has the right to
redeem the property from the buyer for the buyer's purchase price plus ten per
cent interest. Interestingly, the borrower's right to redeem may also be
sold.
Deficiency Judgment
In Kentucky, it is possible to obtain a deficiency
judgment against the borrower for the difference between the amount the
borrower owed on the old loan and the foreclosure sale price, but only if the
borrower was personally served with the lawsuit, or failed to answer. |
