Vermont Foreclosure Laws

Vermont foreclosure laws allow for both judicial and non-judicial foreclosure processes. However, most foreclosures in Vermont are non-judicial. Many foreclosures in Vermont can be completed in nine months.

Pre-Foreclosure

Vermont allows non-judicial foreclosures and strict foreclosure, which is a judicial process. When a debtor is in default and the lender decides to pursue strict foreclosure, the lender must start foreclosure proceedings by filing court documents. When this happens, the debtor will be requested to appear in court via a summons. If the court judges in favor of the lender, the lender can take possession and ownership of the property. Alternatively, the lender can schedule an auction to sell the property.

Far more common in Vermont is the non-judicial foreclosure. This can take place when a mortgage has a power of sale clause, a clause that allows the lender to sell the property without going to court in the event that the mortgage is defaulted. With some types of property, the power of sale clause still necessitates going though the courts, since the courts must decide whether a property is in foreclosure and must rule whether an auction can take place.

With most non-judicial foreclosures allowed by a power of sale clause, the lender starts the foreclosure process by mailing a notice to the debtor, explaining the approaching foreclosure. This notice generally explains the default amount, the options to stop foreclosure, and the circumstances of the foreclosure. The notice usually gives the debtor a minimum of thirty days to repay the default amount and avoid the notice of sale. This thirty day period is generally considered the pre-foreclosure period. This notice needs to be sent to the debtor at least a month before the lender published the notice of sale.

For judicial foreclosures, the debtor can stop the foreclosure up to the point of the auction by repaying the amount in default as well as associated costs. In the event of a court foreclosure, the debtor can stop foreclosure six months from the court ruling. The court usually indicates the amount the debtor must pay to stop foreclosure.

The Foreclosure Auction in Vermont

Before a foreclosure auction can take place, the lender must post and publish the notice of sale. This notice includes the names of the lender and debtor, a description of the property, the mortgage date, the terms of sale, and the time and location of the foreclosure auction. The debtor must be sent this notice at least sixty days before the auction takes place. As well, the lender must publish this notice in a local newspaper for three weeks at the rate of once per week. The first published notice must be printed at least twenty-one days before the auction day. At least sixty days before the auction the lender must record the notice of sale at town records. In a non-judicial foreclosure, this filing is like filing a foreclosure claim in court.

Most of the time, the foreclosure sale takes place at the property that is to the be sold. The highest bidder wins the property, but if the bid price is in excess of the full mortgage and default amount, the extra money goes to the debtor. After the sale, the court has about ten days to confirm the sale. If the sale is confirmed, the winning bidder gets ownership of the house. If the sale is not confirmed, the court demands a resale of the property. In the event of a non-judicial foreclosure, the court obviously does not need to confirm the sale. In this case, ownership is simply transferred to the successful bidder within ninety days of the auction.