Indiana Creates a New “Strict Foreclosure” Statute

Earlier this year, the Indiana Legislature amended and added Section 4 to Indiana Code 32-29-8.  The addition of Section 4 is important to many groups, including banking institutions, purchasers at sheriff sale, and junior lienholders.  It provides these parties a statutory remedy to clear title when a purchaser at sheriff sale and/or plaintiff mortgagee learns that a junior lienholder or other omitted party’s rights in the property were not extinguished by the foreclosure action.

Specifically, Section 4 provides that any time after a decree of sale is entered to foreclose a mortgage, a plaintiff mortgagee, junior lienholder, purchaser, or other omitted party may bring a civil action to determine the omitted party’s interest in the property.  The purpose of the civil action is for the Court to determine the extent of the omitted party’s lien and to possibly terminate the lien on the subject property.  This is essentially known as a statutory strict foreclosure action.  The statute will be beneficial in protecting banking institutions, purchasers at sheriff sale, and junior lienholders.

For more information regarding the ‘Strict Foreclosure’ statute, or collection law in general, contact John Havill, or a member of KDDK’s Creditors’ Rights Practice Team.


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