Indiana Foreclosures: How Long Do They Take?

One question I often get is:  how long does the foreclosure process take in Indiana?  I posted about this back in November, 2006.  With the benefit of seven more years of experience and dozens of more cases, I’ve refined my answer.  As outlined below, commercial foreclosures can take anywhere from five months at the absolute earliest to several years. 

Judicial state.  The first thing to understand is that Indiana is a judicial foreclosure state.  A foreclosure requires a lawsuit, a judgment and a sheriff’s sale.  The process officially starts with the filing of a complaint.  (In residential cases only, Indiana law has pre-suit notice and settlement conference mandates.)

Timing.  Predicting the timing largely depends upon whether and to what extent the borrower contests (defends) the proceeding. 

Uncontested:  5 months minimum.  If a business borrower does not contest a foreclosure, the process can move relatively quickly.  Below are the major steps and an estimated timeline.  Five months is about as fast as things will go.  Realistically, the process will take longer.

Day 1:  Filing of the Complaint.

Day 7+:  Service of process on defendant - can occur in 7 to 10 days, but difficulties perfecting service are not uncommon.  This simple step can take several weeks. 

Day 28/31:  Motion for default judgment - can be sought 21 to 24 days after service of process.  A summary judgment may be preferable to a default judgment, but that should not alter the timing in an uncontested case.

Day 60:  Entry of judgment and decree of foreclosure - should occur in under 30 days.

Day 90:  Praecipe for sheriff’s sale, including notice of same - by statute, cannot be filed until three months after the Complaint.

Day 150:  Sheriff’s sale - happens about 60 days from Praecipe, depending on the county.

Contested:  8+ months minimum.  The steps in a contested case essentially will be the same as those above, except that the court will hold a hearing on the summary judgment motion that will necessarily delay a ruling.  Having said that, with the vagaries of litigation, it’s virtually impossible to conclusively estimate how long a case may last.  Each one is different and driven by a wide variety of factors.  Much depends upon how clear the default and the damages are, and how aggressively each party pushes its position.  An eight-month contested foreclosure is optimistic.  A year is not unusual.

Be prepared for delays.  The timing will be impacted by the docket of a particular court and/or the schedule of an individual civil sheriffs’ office.  Moreover, defense attorneys can prolong the matter by seeking (and obtaining) multiple extensions of time, serving requests for discovery and vigorously challenging a motion for summary judgment.  In the event of a trial, meaning that the court denied summary judgment, a resolution of the case will be deferred many months if not years.  Also remember that defendants can appeal an unfavorable ruling.  Finally, a borrower/mortgagor can stop a sheriff’s sale by filing for bankruptcy protection at any time before the sale begins. 

Even with the best loan documents and great facts, the Indiana foreclosure process, perhaps to the delight of borrowers and certainly the chagrin of lenders, has the potential to be a lengthy and expensive undertaking. 

When Can Post-Judgment Collection Efforts Begin In Indiana?

How long must the holder of an Indiana judgment wait before executing on the judgment?  The answer depends on whether the case is in state or federal court.  Two opinions by Magistrate Judge Cherry address that issue and other proceedings supplemental basics:  Artmann v. Center Garage, 2012 U.S. Dist. LEXIS 153966 (N.D. Ind. 2012) (“Artmann I” - .pdf) and 2012 U.S. Dist. LEXIS 160908 (N.D. Ind. 2012) (“Artmann II” - .pdf). 

Procedural posture.  In Artmann I, the U. S. District Court for the Northern District of Indiana entered judgment in plaintiff’s favor, and one day later plaintiff filed its motion seeking to freeze, and collect upon, defendant’s bank accounts pursuant to Ind. Code §§ 28-9-3-4 and 28-9-4-2.  The opinion dealt with plaintiff’s motion and defendant’s corresponding motion to quash plaintiff’s motion. 

14 days.  The defendant contended that plaintiff’s efforts were premature.  Specifically, Federal Rule 62(a) provides for a 14-day stay of execution on a judgment.  The purpose of the rule is to “afford litigants an ample period of time to consider whether to appeal, to file a motion for new trial and/or to seek a stay of execution of judgment.”  Plaintiff argued that the rule did not bar its request for interrogatories and a hold because plaintiff sought only to “preserve” defendant’s property for eventual satisfaction.  Plaintiff stipulated that it would not actually collect any money until after the 14-day stay had expired. 

Yes and no.  The Court concluded that it could not permit garnishment proceedings before the expiration of the 14-day stay.  As such, plaintiff filed its motion too early.  Clearly the Court could not issue any order granting the motion until the stay ended.  Having said that, the ultimate result in Artmann I was a practical one in that the Court allowed plaintiff’s motion to remain pending until the expiration of the stay period.  (I learned that the Court granted plaintiff’s motion on day 15.) 

State law.  Indiana state court Rule 62(A) does not articulate a 14-day automatic stay of execution, or any stay whatsoever.  Historically, the Indiana state rule provided for a 60-day automatic stay, which later evolved into a 30-day stay and ultimately to no stay at all.  As such, the Artmann I holding only applies in federal court proceedings.  Plaintiffs in Indiana state courts may undertake post-judgment collection efforts immediately.  (Note:  In instances of enforcing a foreign judgment in Indiana, the domestication process cannot commence until 21 days after the entry of the judgment in the original [non-Indiana] court.)      

Pro supp basics.  Artmann II dealt with defendant’s contention that plaintiff’s Artmann I motions did not follow certain technical requirements for proceedings supplemental.  The Artmann II opinion provides a nice summary for judgment creditors and their counsel struggling with the nuts and bolts of proceedings supplemental in federal court.  Specifically, judgment creditors need to remain mindful that, under Indiana law, before courts can entertain a garnishment motion under I.C. §§ 28-9-3-4 and 28-9-4-2, creditors must first (or simultaneously) file a separate motion for proceedings supplemental.

Pro supp relief.  Finally, for those wondering what “proceedings supplemental” can accomplish, the Artmann II opinion noted the three fundamental types of relief available:  (1) requiring a judgment debtor (a defendant) to appear in court for an examination as to available property, (2) requiring a judgment debtor to apply particular property to satisfy the judgment and (3) joining a third-party (a garnishee) to the action and requiring that party to answer as to property held by that party for the judgment debtor.   For more posts on garnishment and proceedings supplemental, including freezing bank accounts, please click on the those Categories to your right.

6 Steps To Domesticate A Foreign Judgment In Indiana

If you hold a judgment entered in a state other than Indiana, and if you believe the judgment debtor has assets in Indiana that could satisfy the judgment, then keep reading. The hoops through which you must jump to reach those assets are outlined in Indiana Code § 34-54-11 “Enforcement of Foreign Judgments.”

I.C. § 34-54-11. Enacted in 2003, and amended in 2010, this Indiana statute tells you just about everything you need to know. Here are the six major steps:

1. Wait at least twenty-one days after the entry of the judgment in the original (non-Indiana) court.

2. File a copy of the foreign judgment, authenticated in accordance with 28 U.S.C. 1963 or any applicable Indiana statutes, in the clerk’s office of any Indiana county.

3. File an affidavit, signed by the judgment creditor, with the clerk that states: a. the name/address of the judgment debtor; and b. the name/address of the judgment creditor.

4. Send a notice of the filing of the foreign judgment to the judgment debtor. Ensure the clerk also has sent the same notice to the judgment debtor. See, I.C. § 34-54-11-2(b) and (c). The clerk’s notice specifically must contain: a. the name and address of the judgment creditor; and b. the name and address of the judgment creditor’s attorney, if any.

5. File proof of your mailing from #4 with the clerk. (Please note: the lack of mailing by the clerk does not affect the viability of the proceedings so long as the judgment creditor files proof of its mailing to the judgment debtor.)

6. Pay a filing fee, which is $133.00 currently.

Once the filing and notice requirements have been met, the judgment creditor is free to proceed as if it holds an Indiana judgment. In other words, you may begin to enforce the judgment by execution or other process.

Statutory changes – mailing and timing. The 2010 amendments deleted the requirement for more traditional constitutional service of process (i.e., certified mail or proof of hand delivery). Instead, it would appear that an overnight-type mailing, which establishes delivery to the address, should suffice. Finally, there is no longer a statutory twenty-one day waiting period to begin post-domestication execution proceedings from the date of delivery of the notice.  Execution can commence as soon as steps 1-6 have been met.

Defenses. My understanding always has been that, in cases of domesticating foreign judgments in Indiana, the judgment debtor’s (the defendant’s) only defense relates to jurisdiction. In other words, the judgment debtor only can attack the validity of the judgment (halt enforcement) by establishing that the original court did not have the power to enter the judgment in the first place – an unlikely scenario. Otherwise, the judgment essentially is presumed to be valid, and the underlying case will not be re-litigated in Indiana. The other potential barrier is if the defendant files an appeal in the original case. An appeal generally will stay the enforcement of the foreign judgment in Indiana until the underlying case concludes.

Old school. I.C. § 34-54-11-5 states that the statute “does not impair” the right to bring an action to enforce a foreign judgment by other means. Before the enactment of the statute, it was common to file a complaint to domesticate (certify) the non-Indiana judgment and to follow all the normal rules and procedures applicable to new lawsuits. I no longer see a benefit to this course of action. The new statute now allows the judgment creditor, initially, to bypass the judge because a separate Indiana court order domesticating or certifying the foreign judgment is not required, unless the debtor files a notice under Sections 2 or 4. The statutory formula should result in the enforcement of a foreign judgment more quickly and, therefore, more inexpensively.

If as an out-of-state judgment creditor you need to pursue the assets of a judgment debtor that are located in Indiana, please contact me or another Indiana lawyer to assist with the process. I.C. § 34-54-11, the relatively new “Enforcement of Foreign Judgments” statute, is your ticket to an expeditious and cost-effective enforcement of your lien.

Indiana Condominium Association Liens, Part II: Deeds In Lieu Of Foreclosure

Whereas last week’s post introduced condominium association (“CA”) liens and their priority in title under Indiana law, this week’s post addresses CA liens in connection with a deed-in-lieu of foreclosure (“DIL”).  A DIL can be a relatively simple and positive transaction for a secured lender struggling with an unperforming loan.  But in cases dealing with a condominium property, lenders need to be careful about inheriting unpaid CA assessments. 

Example scenario.  My colleague Sierra Bunnell and I recently worked on a foreclosure lawsuit involving a condominium.  Settlement discussions led to an agreement for a DIL.  Before closing the DIL, our client, the senior lender/mortgagee, learned that there were unpaid and past due CA charges.  (The CA had not recorded a formal lien notice.)  The question was whether our client could take a DIL without inheriting thousands of dollars owed by its borrower to the CA.  (In cases of a recorded CA lien, the foreclosure/settlement analysis would be no different than with any other case involving a recorded lien.)  Again, our case dealt with an unrecorded lien – an unusual concept - which we described in last week’s post. 

DIL – voluntary.  Under both the homeowner’s association (“HOA”) and condominium association statutory regimes in Indiana, a grantee in a voluntary transaction assumes certain liabilities for the subject real estate.  The amount assumed by a voluntary grantee for an HOA assessment will be limited to those unpaid assessments for which a notice of lien has been recorded, while the grantee would be liable for all unpaid assessments owed to a CA.  See, Indiana Code § 32-25-5-2 (CA) and I.C. § 32-28-14-7 (HOA). 

Options.  If a lender/mortgagee is considering a DIL in a condo case, it should undertake the following steps vis-à-vis the CA to guard against unwittingly exposing itself to liability for an unrecorded lien:

 1. Obtain a payoff letter from the CA and determine whether there are any past due and unpaid charges owed by the borrower.  Lenders are entitled to such statements and will not be liable for any unpaid assessments in excess of the stated amount.  I.C. § 32-25-5-2.  Lenders should then weigh the amount of outstanding assessments against the costs involved with the foreclosure.  Remember, a foreclosure and resulting sheriff’s sale (an involuntary transaction) will terminate any lien.  Depending upon the amount due, the time and expense of foreclosure may be warranted.

 2. One way to avoid foreclosure is to obtain, from the county recorder’s office or a title insurance company, the recorded condominium “declaration,” which is “like the constitution of a condo.”  Review the declaration for lien subordination language.  Declarations may expressly terminate a CA’s lien on the property (not the debt owed by borrower) in favor of a first mortgagee taking title through a DIL.  If that option is available, a lender can avoid liability for the debt altogether.  This is what occurred in Sierra’s and my case, and our title company insured the transaction.   

Again, I appreciate the assistance of Sierra Bunnell with my last two posts. 

Indiana Condominium Association Liens, Part I: Foreclosure

I’ve previously written about the priority of homeowner’s association (“HOA”) liens.  Today’s post relates to similar, but not identical, liens arising out of unpaid condominium association (“CA”) fees/assessments.  Like HOAs, CAs also can foreclose their liens.  Because a lender/mortgagee may, in its own foreclosure case, discover a recorded CA lien on the subject real estate, mortgagees and their foreclosure counsel should be mindful of the distinctions between the HOA and CA statutes and how the CA laws affect priority in title. 

Different laws.  In Indiana, different statutes govern the operation of HOAs (Indiana Code § 32-28-14) and CAs (I.C. § 32-25).  I.C. § 32-25-6 specifically deals with liens of CAs. 

Priority of unrecorded liens.  Unlike an HOA lien, a CA, or a so-called “association of co-owners,” maintains a continuous lien against the subject real estate from the date of the assessment of fees, without regard to whether the CA has recorded a lien notice with the county recorder’s office.  By statute, this CA lien “has priority over all other liens except tax liens and all sums unpaid on a first mortgage of record.”  I.C. § 32-25-6-3(a).  Indiana’s recording statute, I.C. § 32-21-4-1(b), does not apply to these liens, which is to say a lender’s mortgage does not take priority according to the date of its filing, but rather takes senior priority automatically by operation of Indiana Code § 32-25-6-3(a)(2).  This means that, when a lender forecloses, the lender will always enjoy priority over any unrecorded claim for past-due charges owed to a CA.  Further, it would not appear that a foreclosing lender needs to name the CA as a defendant to answer as to its unrecorded lien.   

Priority of recorded liens.  The CA has the authority per I.C. § 32-25-6-3(b) to record a lien on the subject real estate and then foreclose upon it, which foreclosure is governed by Indiana’s mechanic’s lien statute.  (In instances where a CA has recorded a lien, a foreclosing mortgagee should include the CA as a defendant in the foreclosure suit to ensure the CA’s lien is terminated by virtue of the sheriff’s sale.)  If the mortgage’s recording date precedes the recording of the CA’s lien, then the mortgage will have priority over the CA’s lien.  But if a CA records a lien notice before a lender records its mortgage, the priority rule becomes less clear.  The statutory language contains some contradictions on this point.  In the final analysis, I and my colleague Sierra Bunnell, who assisted with this post and the client’s case giving rise to it, believe that the CA’s prior recorded lien will maintain priority over a subsequently-recorded mortgage.  We believe this conclusion is reasonable given the policy of the recording statute, and recommend that a potential lender regard a prior recorded CA lien as an encumbrance on title.  Please comment below or email me if you have a different point of view.

Sheriff’s sale purchaser’s exposure.  I.C. § 32-25-6-3(a) provides that “if the mortgagee of a first mortgage of record or other purchaser of a condominium unit obtains title to the unit as a result of foreclosure of the first mortgage, the acquirer of title . . . is not liable for the share of the [CA charges applicable to that unit] due before the acquisition of title to the unit by the acquirer.”  While that language would seem to provide that the pre-sheriff’s sale charges disappear, the statute goes on to state that the unit’s charges fall back into a pool collectible from all co-owners, including the sheriff’s sale purchaser.  We read this to mean that, although a foreclosing mortgagee will not be on the hook for the full extent of the borrower’s unpaid CA charges, the mortgagee may be responsible for its pro rata portion as a new co-owner.

Next week, in Part II, we will address how to approach CA liens when a lender is considering a deed in lieu of foreclosure.  Thanks to my colleague Sierra Bunnell for her research and input.