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 Arkansas, if a property is foreclosed upon and the sale does not cover the outstanding mortgage balance, the lender may pursue a deficiency balance or mortgage deficiency from the borrower. Arkansas law allows lenders to seek a deficiency judgment against the borrower for the remaining balance owed. This means that after the foreclosure sale, if there is a shortfall, the lender can file a lawsuit to obtain a judgment for the deficiency. If the lender is successful, they may use legal means to collect the debt, such as garnishing wages or seizing other assets of the debtor. However, it's important to note that the specific rights and remedies available to lenders and borrowers can be influenced by the terms of the mortgage agreement and the applicable state statutes. Additionally, borrowers in Arkansas have the option to discharge a deficiency judgment through Chapter 7 or Chapter 13 bankruptcy, which can provide relief from the obligation to pay the deficiency under certain conditions.