Recently, an out-of-state client asked whether the defendant borrower, in an Indiana commercial foreclosure case we're handling, will have the right to redeem the mortgage after the sheriff's sale. The client was pleased to learn that, even though some states may permit redemption post-sale, Indiana is not one of them.
Indiana redemption rights. Indiana does provide a pre-sale right of redemption. Please see my February 1, 2008 post for details.
Mortgages. Ind. Code 32-29-7-13 states: "There may not be a redemption from the foreclosure of a mortgage executed after June 30, 1931, on real estate except as provided in this chapter." Thus the general statutory rule is that there is no right of redemption. (My 2-1-08 post addresses the "before the sale" statutory exception, Ind. Code 32-29-7-7.) Well-settled Indiana case law provides that "a foreclosure sale cuts off a mortgagor's rights of redemption." Patterson v. Grace, 661 N.E.2d 580, 585 (Ind. Ct. App. 1996); Overmyer v. Meeker, 661 N.E.2d 1271, 1275 (Ind. Ct. App. 1996); Vanjani v. Federal Land Bank of Louisville, 451 N.E.2d 667, 672, n.1 (Ind. Ct. App. 1983).
UCC Security Interests. Similarly, Indiana's UCC, at Ind. Code 26-1-9.1-623, also covered in my prior post, calls for redemption rights to be terminated upon disposition of the collateral. The "Official Comment" to the section states that "the debtor or another secured party may redeem collateral as long as the secured party has not collected, disposed of or contracted for the disposition of, or accepted the collateral." The "Indiana Comment" states that Section 623 "recognizes the right of the debtor and other secured parties to redeem any time after default before disposal of the collateral or rescission under Section 502(2), unless otherwise agreed in writing after default."
When the fat lady sings. Lenders enforcing mortgage liens or security interests in Indiana can rest assured that, once there is a sheriff's sale or a disposition of personal property collateral, the borrower's/debtor's right of redemption is terminated. The borrower/debtor no longer owns the property, and no longer has any rights in or to the property. If warranted, deficiency collection, among other things, can commence.