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 Washington State, after a property is foreclosed and sold, if the sale proceeds are insufficient to cover the mortgage debt, the lender may seek a deficiency judgment for the remaining balance, known as a deficiency balance. However, Washington has specific statutes that limit the circumstances under which a deficiency judgment can be obtained. For instance, under RCW 61.24.100, deficiency judgments are generally not allowed after a nonjudicial foreclosure of owner-occupied residential property. There are exceptions, such as when the borrower is a guarantor or if the foreclosure is judicial. If a lender does obtain a deficiency judgment, they may pursue the debtor's other assets or garnish wages. Debtors have the option to discharge the deficiency judgment in a Chapter 7 or Chapter 13 bankruptcy. It's important for individuals facing foreclosure to understand their rights and obligations under Washington law and to consult with an attorney for guidance specific to their situation.