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 Louisiana, a deficiency balance can arise when a property is foreclosed upon and the sale does not cover the full amount of the mortgage debt. Louisiana law allows lenders to seek a deficiency judgment against the borrower for the remaining balance. However, the lender must adhere to specific procedures, including filing a lawsuit within a certain time frame after the foreclosure sale. If the lender is successful in court, they may pursue the borrower's other assets or garnish wages to satisfy the judgment. It's important to note that in Louisiana, anti-deficiency laws may limit the lender's ability to obtain a deficiency judgment in certain circumstances, such as when the mortgage is a non-recourse loan or under specific conditions related to the property's sale. Borrowers have the option to discharge a deficiency judgment through Chapter 7 or Chapter 13 bankruptcy, which can provide relief from the debt under federal bankruptcy laws. The applicability of these laws can be complex, and borrowers facing a potential deficiency judgment should consult with an attorney to understand their rights and obligations under Louisiana law.