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 North Carolina, if a property is foreclosed upon and the sale does not cover the outstanding mortgage balance, the lender may seek a deficiency judgment against the borrower for the remaining amount. North Carolina General Statutes § 45-21.36 allows for deficiency judgments following foreclosure sales, but there are certain limitations. For example, if the loan was a purchase money mortgage (used to buy the property), and the property is a single-family dwelling that was the borrower's primary residence, the borrower may be protected from a deficiency judgment under certain circumstances. Additionally, North Carolina has an 'anti-deficiency' statute for certain types of loans, which can provide further protections to borrowers. If a lender obtains a deficiency judgment, they may pursue the borrower's other assets or garnish wages. However, borrowers have the option to discharge the deficiency judgment through Chapter 7 or Chapter 13 bankruptcy. It's important to note that the specifics of each case can vary, and an attorney can provide guidance tailored to an individual's situation.