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 Massachusetts, if a property is foreclosed upon and the sale does not cover the outstanding mortgage balance, the lender may be left with a deficiency balance. Massachusetts allows lenders to seek a deficiency judgment against the borrower for this remaining debt. However, the process is regulated by state law, including the requirement that the foreclosure sale be conducted in a commercially reasonable manner. If the lender obtains a deficiency judgment, they may pursue the borrower's other assets or garnish wages to satisfy the debt. It's important to note that borrowers have the right to receive a notice of the deficiency and have the opportunity to challenge the amount in court. Additionally, Massachusetts has a 'right to cure' law that gives borrowers a chance to pay the overdue amounts before foreclosure proceedings can begin. As for bankruptcy, both Chapter 7 and Chapter 13 can potentially discharge a deficiency judgment, but specific circumstances of the borrower's financial situation and the bankruptcy proceedings will determine if this is possible. Borrowers facing a potential deficiency judgment in Massachusetts should consult with an attorney to understand their rights and options under state law.