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Real property

deficiency balance on foreclosure

A deficiency balance on foreclosure—also known as a mortgage deficiency or deficiency balance—occurs when a home or property is foreclosed on and the sale proceeds are not sufficient to pay off the mortgage. The remaining balance owed on the mortgage is a deficiency balance or mortgage deficiency.

Laws vary from state to state and a state’s laws and the terms of the mortgage may determine whether the mortgage lender (bank or mortgagee) will pursue a mortgagor who defaulted on a mortgage for any deficiency balance.

In Indiana, if a property is foreclosed upon and the sale does not generate enough funds to cover the outstanding mortgage balance, the lender may seek a deficiency judgment against the borrower for the remaining amount. This is known as a deficiency balance. Indiana law allows lenders to pursue this deficiency if they choose to do so. However, the lender must file a lawsuit to obtain a deficiency judgment within three months after the sale of the property. If the court grants the judgment, the borrower is then liable for the deficiency balance. It's important for borrowers in Indiana to understand that foreclosure does not necessarily absolve them of all financial obligations associated with the mortgage, and they may still be responsible for any shortfall following the foreclosure sale.

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Real property

deficiency balance on foreclosure

Individual & Family Legal Plan

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Real property

deficiency balance on foreclosure

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