Summary of Kentucky Foreclosure Laws

The laws that govern Kentucky foreclosures are found in different sections of the Kentucky Revised Statutes, Chapter 426.

Kentucky is a lien theory state. This means the property acts as security for the underlying loan. The mortgage is the document that places the lien on the property. It is filed to evidence the underlying loan and the specific terms of repayment which are set forth in the promissory note. There is no power of sale mortgage provision recognized in the KRS. In order to foreclose on a mortgage, the lender must go to court in what is known as a judicial foreclosure proceeding.  A lis pendens is recorded in the deed records at the time the foreclosure complaint is filed.  It provides public notice that the property is being foreclosed upon.  During the foreclosure proceeding, the court will issue a final judgment of foreclosure. The property will then be sold as part of a publicly noticed sale.

Before the property is sold at foreclosure sale, the sale is usually advertised for sale for at least three weeks prior.  

Kentucky does have a limited statutory right of redemption, which allows a party whose property has been foreclosed to reclaim that property by making payment in full of the sum of the unpaid loan plus costs and ten percent interest. There is a one year time limit to exercise this right and the right is only available if the foreclosure sales price is less than two-thirds of the appraised value.  Also, the right of redemption can be sold or assigned to a third party. 

A deficiency judgment may be obtained when a foreclosed property is sold at a public sale for less than the loan amount that the mortgage secures. In this case, the borrower still owes the lender for the difference between what the property sold for at the foreclosure sale and the amount of the original loan.  Deficiency judgments are only available in the event that the borrower was personally served with the foreclosure complaint and/or was served, but did not file an answer.