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 Wisconsin, if a property is foreclosed and the sale does not cover the outstanding mortgage balance, the lender may seek a deficiency judgment for the remaining debt. Wisconsin Statute § 846.165 allows lenders to obtain a deficiency judgment following a foreclosure sale, but they must do so within a certain time frame—typically within 3 months after the sale. However, Wisconsin law also provides certain protections for borrowers. For example, if the foreclosed property was the borrower's primary residence, the borrower may be protected under the Wisconsin Consumer Act, which can limit the circumstances under which a deficiency judgment may be pursued. Additionally, borrowers have the option to discharge a deficiency judgment through bankruptcy under Chapter 7 or Chapter 13, which can provide relief from the debt. It's important for borrowers facing foreclosure in Wisconsin to understand their rights and obligations under state law, and they may benefit from consulting with an attorney to explore their options and any potential defenses they may have against a deficiency judgment.