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 Michigan, if a property is foreclosed and the sale does not cover the outstanding mortgage balance, the lender may pursue a deficiency balance from the borrower. This is the amount still owed after the foreclosure sale proceeds have been applied to the mortgage debt. Michigan law allows lenders to seek a deficiency judgment against the borrower for this remaining balance. If the lender obtains a deficiency judgment, they can potentially garnish the borrower's wages or claim other assets to satisfy the debt. However, borrowers have the option to discharge a deficiency judgment through Chapter 7 or Chapter 13 bankruptcy. The specific rights and remedies available, as well as whether a lender will pursue a deficiency judgment, can depend on the terms of the mortgage contract and the particular circumstances of the foreclosure. It's important for borrowers facing foreclosure to understand their rights under Michigan law and to consider seeking advice from an attorney to navigate the process and explore their options.