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 Rhode Island, if a property is foreclosed upon 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 deficiency balance is the difference between the sale proceeds and the mortgage debt. Rhode Island law permits lenders to pursue deficiency judgments following a foreclosure, but there are specific procedures and time frames that must be followed. For instance, the lender must file a motion for a deficiency judgment within a certain period after the foreclosure sale. If the lender obtains a deficiency judgment, they may then take legal action to collect the debt, which could include garnishing wages or seizing other assets of the debtor. However, borrowers in Rhode Island have the option to discharge a deficiency judgment through Chapter 7 or Chapter 13 bankruptcy, which can provide relief from the obligation to pay the deficiency balance. It's important for borrowers facing foreclosure to understand their rights and obligations under Rhode Island law and to consult with an attorney for guidance specific to their situation.