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 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. South Dakota Codified Laws (SDCL) govern the process and limitations of obtaining a deficiency judgment after foreclosure. The lender must file a lawsuit to obtain a deficiency judgment within a certain time frame after the foreclosure sale. If the court grants the judgment, the lender can then pursue collection methods such as wage garnishment or seizing other assets of the debtor. However, borrowers have the option to discharge the deficiency judgment through Chapter 7 or Chapter 13 bankruptcy, subject to the rules and procedures of the bankruptcy court. It's important for borrowers in South Dakota to understand their rights and obligations under state law and the specific terms of their mortgage agreement when facing a potential deficiency judgment after foreclosure.