What is a deficiency judgment in a foreclosure?

A deficiency judgment is what the lender receives after a court approves their request to collect the deficiency balance. After getting the deficiency judgment, the lender can then take steps to collect the remaining balance. A popular tactic involves garnishing wages. Deficiency judgments don’t just exist with foreclosures.

Are deficiency judgments automatic?

Even where they’re allowed, deficiency judgments are not automatic. The lender must make a motion to request one. If the lender does not make the motion, then the court will find the money obtained from the sale of the foreclosed property to be sufficient.

What happens if you get a deficiency judgment?

Lenders that obtain a deficiency judgment may be able to garnish the debtor’s wages, seize other property, or take money from their bank account. The legal principle of a deficiency judgment could apply to any secured loan, such as a car loan, where property seized from a defaulting debtor sells for less than the lender is still owed on it.