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 North Dakota, if a property is foreclosed upon and the sale does not cover the outstanding mortgage balance, the lender may seek a deficiency judgment for the remaining balance from the borrower. This is known as a deficiency balance or mortgage deficiency. North Dakota law, specifically North Dakota Century Code (NDCC) 32-19-06, limits the time frame in which a lender can seek a deficiency judgment to within 90 days after the foreclosure sale. Additionally, the amount of the deficiency judgment may be limited by the fair market value of the property at the time of the sale, as the lender cannot obtain a deficiency judgment for more than the difference between the debt owed and the fair market value of the property. If a borrower files for Chapter 7 or Chapter 13 bankruptcy, the deficiency judgment may be discharged, meaning the borrower would no longer be responsible for paying the deficiency balance. It's important for borrowers facing foreclosure in North Dakota to consult with an attorney to understand their rights and obligations under state law.