An Alaska Supreme Court ruling shows how state child support liens can jump ahead of earlier judgment creditors when you are dividing foreclosure surplus funds
Alaska’s top court just put child support liens ahead of some creditors in foreclosure surplus payouts, reshaping how trustees and servicers must handle sales.
On November 28, 2025, the Alaska Supreme Court weighed in on a fight over who gets paid first from surplus funds after a nonjudicial foreclosure: a credit union with an earlier judgment lien, or the state’s child support agency with a later lien.
The story starts with a property in Eagle River, Alaska. Troy and Shanda Lewis owned a home encumbered by a deed of trust that was later assigned to Wells Fargo Bank, N.A. In January 2017, Alaska USA Federal Credit Union recorded a judgment lien against Troy Lewis for $32,693.42 plus interest. In September 2017, the State of Alaska’s Child Support Services Division (CSSD) recorded its own lien against Lewis for $14,241.35 in child support arrears.
In 2018, The Sayer Law Group, P.C., acting as trustee, carried out a nonjudicial foreclosure under the Wells Fargo deed of trust. The sale brought in $168,000. After Wells Fargo was paid off, there was a surplus of $34,590.31.
The trustee notified junior interest holders, including Alaska USA, CSSD and Troy Lewis, that surplus funds would be paid out in order of priority. Alaska USA submitted a claim for $38,783.68. CSSD claimed $22,186.56, reflecting an increased child support balance. Troy Lewis claimed any remaining surplus.
Sayer Law initially indicated that Alaska USA would receive the entire surplus, noting that the credit union held “the first recorded Judgment Lien.” CSSD objected. It sent a letter stating that it was asserting its lien against the surplus funds and that, under AS 25.27.230(d), those funds had to be distributed to CSSD first unless the lien was waived or released. The next day, CSSD issued a child support withholding order directing Sayer Law to deliver $25,428.20.
The trustee then paid enough of the surplus to satisfy CSSD’s child support lien and sent the remaining $9,162.11 to Alaska USA. The credit union rejected the check and sued, arguing that lien priority rules meant its earlier judgment lien should be paid before CSSD’s later-recorded lien.
The Alaska Supreme Court addressed the withholding order and the lien separately. It held that the withholding order under AS 25.27.250 did not apply here because such orders only reach property “due, owing, or belonging” to the child support obligor. At the time CSSD issued its order, the surplus was insufficient to satisfy both Alaska USA’s and CSSD’s liens, so no portion of the surplus was due, owing, or belonging to Troy Lewis. The withholding order therefore had no effect on the surplus.
The court reached a different conclusion on the lien itself. Once CSSD’s lien was recorded and Sayer Law had actual notice, AS 25.27.230(d) prohibited the transfer of property subject to that lien – including surplus foreclosure funds – unless CSSD waived the lien or it was released by a superior court or administrative hearing officer. The court held that this prohibition applies in nonjudicial foreclosures and applies to judgment lienholders, including those whose judgment liens were recorded before CSSD’s lien.
In practical terms, the court concluded that Sayer Law complied with Alaska law: Wells Fargo, as deed of trust beneficiary, was paid first; CSSD’s lien was then satisfied from the surplus; only after that were remaining surplus funds sent to Alaska USA. Even though Alaska USA’s judgment lien was recorded earlier, it could not be paid ahead of CSSD’s child support lien from the surplus proceeds.
For mortgage professionals, the implication is clear. In Alaska nonjudicial foreclosures with surplus funds, a recorded CSSD child support lien with notice to the trustee can effectively take priority over earlier judgment liens when surplus is distributed. Trustees handling surplus funds must account for child support liens, not just recording dates, when determining who gets paid and in what order.
