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 Kentucky, if a property is foreclosed and the sale does not cover the outstanding mortgage balance, the lender may pursue the borrower for the remaining debt, known as a deficiency balance. Kentucky law permits lenders to seek a deficiency judgment against the borrower for this amount. If the lender obtains a deficiency judgment, they can use legal means to collect the debt, which may include garnishing wages or seizing other assets of the debtor. However, borrowers in Kentucky have the option to discharge a deficiency judgment through bankruptcy under Chapter 7 or Chapter 13. The specifics of whether a lender will pursue a deficiency judgment can depend on the terms of the mortgage contract and the lender's policies. It's important for borrowers facing foreclosure to consult with an attorney to understand their rights and obligations under Kentucky law.