Vermont foreclosure laws: how the process works and how long it takes

• 12 V.S.A. § 4931 et seq.: Primary framework for judicial foreclosure in Vermont. Governs the court process for foreclosure, decree of foreclosure, sale procedures, and redemption.
• 12 V.S.A. § 4631 et seq.: Lets the owner-occupant of a home of four units or less request mediation in the foreclosure case, until four months after judgment and before the redemption period ends. The lender must serve a mediation notice with the summons and complaint and, in mediation, consider foreclosure prevention tools such as reinstatement, loan modification, forbearance and short sale. Mediation does not pause the redemption period.
• 12 V.S.A. §§ 4946, 4949: For farmland or a home the owner lives in as a principal residence, the decree gives six months from its date to redeem, unless the court orders a shorter time; for other property the redemption period is eliminated or cut to no more than 30 days. The borrower can also redeem at any time before the public sale by paying the full amount due under the judgment plus allowed post-judgment costs.
• 12 V.S.A. § 4941 et seq.: Provides for strict foreclosure where title vests in the lender without a sale. Requires court authorization. The court can order it only if there is no substantial value in the property beyond the debt owed to the lender and other lienholders plus unpaid property taxes, and any party can ask for a judicial sale instead.
• 27 V.S.A. § 101: Establishes a $125,000 homestead exemption protecting equity in the primary residence from judgment creditors. Does not protect against mortgage foreclosure.

When the redemption period in the decree ends without redemption, the clerk issues a writ of possession at the foreclosing party's request and with the court's approval, and it is carried out like a writ in an ejectment case (12 V.S.A. § 4946(d)). A residential tenant must be served with the writ, and the foreclosing party can take possession no sooner than 30 days after service, or any longer time federal law requires, without a separate eviction case. The federal Protecting Tenants at Foreclosure Act provides 90-day notice to bona fide tenants.

Surplus proceeds from the foreclosure sale (above the debt and costs) belong to the former owner after junior lienholders are paid in priority order.

Generally first in time, first in right under Vermont recording statutes. Property tax liens have priority over all other liens including first mortgages. Municipal tax lien foreclosure is available.

Vermont law sets several time limits that could apply: an action to recover land or its possession must be started within 15 years after the cause of action accrues (12 V.S.A. § 501); most other civil actions, within six years (12 V.S.A. § 511); and an action to enforce a note payable at a definite time, within six years after its due date or accelerated due date (9A V.S.A. § 3-118(a)). Which one governs a given foreclosure is a question for a local attorney. For a note payable at a definite time: six years after the due date, or after the accelerated due date if the lender accelerated the loan. Different rules apply to notes payable on demand (9A V.S.A. § 3-118(b)). The lender may request a deficiency judgment in the foreclosure complaint and must request it before the court issues the order confirming the sale; failing to request it waives any deficiency judgment against the borrower (12 V.S.A. § 4954(d)). Consult a local attorney for specific deadlines.

• Unpaid property taxes: Property tax liens have priority over mortgage liens in Vermont. If the owner owes at least $1,500 and has been delinquent for more than one year, the town tax collector can sell the property itself at a public tax sale, but only after offering a written repayment plan that the owner declined, did not answer within 30 days, or did not keep (32 V.S.A. § 5252). The owner, a lienholder or a mortgagee can redeem within one year from the day of sale by paying the sale price plus interest of one percent a month, and the collector must send a notice 90 to 120 days before the redemption period ends (32 V.S.A. § 5260). Contact the municipal tax collector for specific procedures.

$125,000. Protects up to $125,000 of equity in your primary residence from judgment creditors. Does not stop mortgage foreclosure. Vermont's homestead exemption (27 V.S.A. § 101) protects up to $125,000 in value of a homestead from attachment and execution by creditors. It does not apply to claims that already existed when the homestead deed was recorded (27 V.S.A. § 107) or to property taxes (27 V.S.A. § 108). The exemption is relevant if a deficiency judgment is pursued. The exemption does not protect against mortgage foreclosure itself.

No Vermont-specific military foreclosure protections beyond federal SCRA identified. Under the federal SCRA, if you took out your mortgage before active duty, you generally can't be foreclosed on without a valid court order while you are on active duty and for 12 months after leaving active duty, and you can ask for a mortgage interest rate reduction to 6 percent for the time you are on active duty and for an additional year after. Vermont National Guard members deployed from the state should contact their legal assistance office. Vermont has a relatively small active military population but a significant Guard/Reserve presence.

Canceled debt may create Vermont income tax as well as federal tax, because Vermont taxable income for an individual starts from federal adjusted gross income (32 V.S.A. § 5811(21)). The $125,000 homestead exemption protects up to $125,000 in value of a homestead from attachment and execution by creditors, with exceptions, including claims that already existed when the homestead deed was recorded (27 V.S.A. §§ 101, 107).