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 New York, if a property is foreclosed and the sale does not cover the outstanding mortgage balance, the lender may seek a deficiency judgment against the borrower for the remaining amount. This is known as a deficiency balance or mortgage deficiency. New York is a judicial foreclosure state, meaning the lender must go through the court system to foreclose on a property and obtain a deficiency judgment. The lender has 90 days after the foreclosure sale to file for a deficiency judgment. If granted, the lender can then use legal means to collect the deficiency, such as garnishing wages or seizing assets. However, borrowers have certain protections; for example, the amount of the deficiency judgment may be limited if the sale price was unfairly low. Additionally, borrowers can discharge deficiency judgments in a Chapter 7 or Chapter 13 bankruptcy, which can provide relief from the debt. It's important to note that the specific circumstances of the mortgage and state laws will affect whether a lender will pursue a deficiency judgment.