With regard to real estate, the process by which the holder of a lien causes the “auction” of the subject property in order to satisfy the underlying debt evidenced by the lien. Foreclosure extinguishes the interest of the property owner and those parties with secured interests junior to that of the foreclosing party (senior lien interests survive foreclosure). The underlying debt is satisfied (1) by funds from the auction high-bidder; or (2) if there are no competitive bids, by funds from the sale of the property after foreclosure. In Colorado, prior to auction, the owner can stop the process by paying the debt current (“curing”) or by paying it off entirely. A junior lien holder protects its interest by “redeeming” the property after auction – that is, by paying the bid amount of the foreclosing party (or the auction high-bidder, or a prior redeeming lien holder). A redeeming junior lien holder (1) becomes the owner of the property (and can sell it to satisfy its own debt); or (2) has its own debt paid by a latter redeeming junior lien holder. In Colorado, foreclosure pursuant to a deed of trust is handled by the public trustee for the county in which the property is situate. Foreclosures pursuant to other encumbrances (e.g., judgments, mechanics’ liens) are handled through the courts. Compare tax sale.
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