In the order of proceeds distribution after a foreclosure sale, what comes immediately after the creditor's costs?

In the order of proceeds distribution after a foreclosure sale, the correct step following the creditor's costs is to satisfy the secured debt to the disposing creditor. This reflects the legal priority in which obligations are settled following a foreclosure.

When a foreclosure occurs, any costs incurred by the creditor, such as legal fees and expenses related to the sale, are first deducted from the proceeds. Once those costs have been covered, the next obligation that must be satisfied is the outstanding amount of the secured debt owed to the creditor who conducted the sale. This principle aligns with the "priority of claims" framework in secured transactions, whereby the secured creditor's rights take precedence over other potential claims against the proceeds.

In this context, the remaining options do not follow the established priority. The debt to a subordinate secured creditor would be satisfied only after the primary creditor's debt has been addressed. Excess returns to the debtor would occur only after all senior debts and costs have been fully paid, and costs incurred by the debtor are typically not prioritized in the distribution process following a foreclosure. This hierarchy ensures that all primary claims, especially those directly tied to the secured interests, are prioritized before any distributions to subordinated claims or the debtor.