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 Florida, 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 balance from the borrower. Florida Statute § 702.06 allows lenders to claim a deficiency within one year after the foreclosure sale or the date the clerk issues the certificate of title. The court will determine the deficiency amount based on the fair market value of the property at the time of sale and the remaining debt. If the borrower files for bankruptcy under Chapter 7 or Chapter 13, the deficiency judgment may be discharged, releasing the borrower from the obligation to pay the deficiency. However, the specifics of how the deficiency is handled in bankruptcy will depend on the individual's financial situation and the bankruptcy court's rulings. It's important for borrowers facing a potential deficiency judgment in Florida to consult with an attorney to understand their rights and options under state law and federal bankruptcy regulations.