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 South Carolina, 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 legal action allows the lender to collect the deficiency balance from the borrower through wage garnishment or seizure of assets. However, South Carolina law provides certain protections for borrowers, including the right to receive notice of the right to bid at the foreclosure sale and the opportunity to set off the fair market value of the property against the owed debt, which can reduce or eliminate the deficiency balance. Additionally, borrowers in South Carolina have the option to file for Chapter 7 or Chapter 13 bankruptcy, which can discharge a deficiency judgment. The specifics of how a deficiency judgment is handled in South Carolina can depend on the terms of the mortgage agreement and the outcome of any legal proceedings. It is advisable for individuals facing a potential deficiency judgment to consult with an attorney to understand their rights and options under South Carolina law.