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 Tennessee, if a property is foreclosed and the sale does not cover the outstanding mortgage balance, the lender may pursue the borrower for the remaining deficiency balance. Tennessee allows for deficiency judgments, which means the lender can file a lawsuit against the borrower to recover the unpaid portion of the loan. If the court grants a deficiency judgment, the lender can then use various methods to collect the debt, such as garnishing wages or seizing other assets of the debtor. However, it's important to note that the lender's ability to pursue a deficiency judgment may be subject to certain conditions and time limits, as outlined in Tennessee's foreclosure laws. Additionally, borrowers in Tennessee have the option to discharge a deficiency judgment through bankruptcy under Chapter 7 or Chapter 13, which can provide relief from the obligation to pay the deficiency balance under certain circumstances.