Deficiency Judgment: What You Need to Know About Its Legal Definition
Definition & Meaning
A deficiency judgment is a court order that allows a lender to collect the remaining balance owed on a debt after a property has been sold at a foreclosure auction. This judgment typically represents the difference between the sale price of the property and the total amount still owed on the mortgage. Deficiency judgments are most common when the proceeds from the sale of a property do not cover the outstanding mortgage balance.
Legal Use & context
Deficiency judgments are primarily used in the context of foreclosure proceedings. When a borrower fails to repay their mortgage, the lender may initiate foreclosure to recover the debt. If the property sells for less than the amount owed, the lender can seek a deficiency judgment to recover the remaining balance. This process is often part of civil law and may involve various legal forms and procedures that users can manage with tools like US Legal Forms.
Real-world examples
Here are a couple of examples of abatement:
(Hypothetical example) If a homeowner owes $300,000 on their mortgage and the property is sold at foreclosure for $250,000, the lender may seek a deficiency judgment for the remaining $50,000.
(Hypothetical example) In another case, a property sold for $200,000 while the mortgage balance was $250,000, leading the lender to pursue a deficiency judgment for $50,000.