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 Ohio, if a property is foreclosed upon 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. Ohio law permits lenders to file a lawsuit to obtain a deficiency judgment against the borrower for this remaining balance. If the court grants the judgment, the lender can then use legal means to collect the debt, which may include garnishing wages or seizing other assets of the debtor. However, borrowers in Ohio have the option to discharge a deficiency judgment through bankruptcy under Chapter 7 or Chapter 13. The specifics of whether a lender will seek a deficiency judgment can depend on the terms of the mortgage contract and the lender's policies. It's important for borrowers facing foreclosure to consult with an attorney to understand their rights and obligations under Ohio law.