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.

And if a mortgage lender (bank or mortgagee) files a lawsuit against a mortgagor (debtor) who defaulted on a mortgage, the lender may obtain a court judgment known as a deficiency judgment. With this judgment the lender can try to garnish the debtor’s wages or go after the debtor’s other assets for payment or satisfaction of the deficiency judgment.

A deficiency judgment may be discharged in Chapter 7 or Chapter 13 bankruptcy.

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

In Georgia, if a property is foreclosed and the sale does not cover the outstanding mortgage balance, the lender may pursue a deficiency balance from the borrower. This is the amount still owed after the foreclosure sale proceeds have been applied to the mortgage debt. Georgia law permits lenders to seek a deficiency judgment against the borrower for this remaining balance. To obtain a deficiency judgment, the lender must confirm the foreclosure sale within 30 days by filing a report with the court and obtaining a court order confirming the sale. If the court finds that the property sold for its true market value, the lender can then pursue the deficiency. However, borrowers have the option to discharge the deficiency judgment through Chapter 7 or Chapter 13 bankruptcy. The specific rights and obligations regarding deficiency balances and judgments can be complex and may depend on the terms of the mortgage agreement and the specifics of state law. Borrowers facing a potential deficiency judgment in Georgia may benefit from consulting with an attorney to understand their legal options and protections.