A deficiency suit is a legal action taken by a lender to recover the remaining balance owed on a mortgage after a foreclosure sale. When a property is foreclosed, the lender typically sells the property to recoup some of the unpaid debt. If the sale proceeds are less than the outstanding mortgage balance, the lender may file a deficiency suit to collect the difference from the borrower.
Deficiency suits are primarily used in civil law, particularly in cases involving real estate and mortgage agreements. They arise when a borrower defaults on their loan, and the lender seeks to recover the remaining balance after foreclosure. Users can manage some aspects of this process, including filing for a deficiency judgment, using legal templates available through US Legal Forms.
Here are a couple of examples of abatement:
(Hypothetical example) A homeowner owes $300,000 on their mortgage. After foreclosure, the property sells for $250,000. The lender may file a deficiency suit for the remaining $50,000 owed by the homeowner.
| State | Deficiency Judgment Rules |
|---|---|
| California | No deficiency judgment for purchase money mortgages. |
| Florida | Allows deficiency judgments, but the lender must prove the amount owed. |
| New York | Deficiency judgments are allowed, but the lender must follow specific procedures. |
This is not a complete list. State laws vary, and users should consult local rules for specific guidance.
| Term | Definition | Difference |
|---|---|---|
| Deficiency Judgment | A court order to pay the remaining debt after foreclosure. | Deficiency suit is the action taken to obtain the judgment. |
| Foreclosure | The legal process by which a lender takes possession of a property. | Foreclosure is the event that may lead to a deficiency suit. |
If you are facing a deficiency suit, consider the following steps:
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