Deficiency Judgments After Foreclosure

After your home is sold at auction, the proceeds of the sale go to pay back the plaintiff for the money you owed on the mortgage. If there are others who have liens on the house, they will also be paid out of the sale price. If the sale price is not enough to cover your debt, the amount still owed to the plaintiff is called a deficiency. For example, the total debt owed is $500,000, but the home sells for only $450,000 at the auction. The deficiency is $50,000.

When there is a deficiency, the plaintiff can make a motion to ask the court for a judgment against you for the difference. This is called a deficiency judgment. But, the plaintiff’s judgment is limited under the law by the fair market value of the home. The amount of the deficiency judgment is equal to the amount of the debt minus the fair market value or the sale price, whichever is higher. For example, if the total debt owed is $500,000, and the home sold for $450,000, but the fair market value is only $475,000, the deficiency judgment can only be for $25,000. The court decides the fair market value.

If the plaintiff wants a deficiency judgment, the motion must be made within 90 days after the deed is delivered to the buyer after the sale. The motion also asks to confirm the sale.


Opposing a Motion for a Deficiency Judgment

You can serve and file papers in opposition to the plaintiff’s motion for a deficiency judgment, including interest and penalties (see How to Ask the Court for Something). The reasons or defenses you say to oppose the deficiency judgment depend on the facts of your case. Possible defenses may include:

  • The plaintiff did not make the motion within 90 days from the date the deed was delivered to the buyer.
  • You were never personally served with the summons and complaint and never appeared in the action.
  • The plaintiff did not serve you the right way with the motion for the deficiency judgment. The plaintiff must serve you personally, unless the judge gives permission to serve you a different way.
  • The fair market value of the home was less than the plaintiff says it was at the time of the sale. You must submit proof from an appraiser to support this.


Effect of a Deficiency Judgment

The plaintiff can take steps to collect the deficiency judgment against you, including garnishing your salary and levying your bank account for 20 years (see Collecting a Judgment). If you file for bankruptcy, the debt will be discharged.


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