Indiana Foreclosure Rules
Foreclosure laws in Indiana are shaped by the lien theory of ownership. This theory holds that the mortgaged property is collateral for the mortgage loan. As such, the property belongs to the borrower. A lien is placed on the property and is removed once the terms of the mortgage contract are fulfilled.
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Judicial Foreclosure
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Indiana only recognizes the judicial method of foreclosure. This method mandates that the lending agent file a lawsuit against the borrower. The court will typically set a deadline for payments in arrears to be caught up. If these payments are not made, the court will issue an order to sell the property to the highest bidder.
Waiting Period and Notice
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Once the court issues a foreclosure order, the lending agent must wait a specified amount of time before the property may be auctioned, usually between three and 12 months. The exact amount of time required depends on when the mortgage was signed. The borrower has the ability to waive this waiting period if he chooses. Once the sale date is established, the lender must take out an advertisement in the local newspaper at least once per week for three consecutive weeks, with the first ad appearing at least 30 days before the auction. The borrower must be notified by the time the first ad runs. The borrower has the option to stay on the property, rent free, until the auction date, as long as no damage is done to the property.
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Deficiency
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A deficiency occurs when the auction price is lower than the balance due on the mortgage loan. The lending agent has the right to file a suit against the borrower for payment of this difference. If the borrower waived the right to a waiting period, then the lender does not have the right to seek a deficiency judgment.
Crops
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Once the property has been foreclosed on, the borrower has the right to continue to maintain, care for and harvest any crops that were growing at the time the auction occurred. This right lasts for one year after the auction has been completed.
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