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 Connecticut, if a property is foreclosed and the sale does not cover the outstanding mortgage balance, the lender may seek a deficiency judgment for the remaining debt. Connecticut General Statutes § 49-14 allows a lender to file a motion for a deficiency judgment within 30 days after the court-approved sale of the property. If granted, the lender can pursue the debtor's other assets or income to satisfy the debt. However, the amount and enforceability of a deficiency judgment may be influenced by factors such as the type of mortgage, whether the property is residential or commercial, and the original loan-to-value ratio. Debtors have the option to discharge a deficiency judgment through Chapter 7 or Chapter 13 bankruptcy, subject to the bankruptcy court's rules and exemptions. It's important for individuals facing foreclosure or a deficiency judgment in Connecticut to consult with an attorney to understand their rights and obligations under state law.