Business, Legal & Accounting Glossary
n. a judgment for an amount not covered by the value of security put up for a loan or instalment payments. In most US states, the party owed money can only get a deficiency judgment if he/she chooses to file a suit for judicial foreclosure instead of just foreclosing on real property. However, some states allow a lawsuit for a deficiency after foreclosure on the mortgage or deed of trust. The right to a deficiency judgment is often written into a lease or instalment contract on a vehicle. There is a danger that the sale of a repossessed vehicle will be at a wholesale price or to a friend at a sheriff’s sale or auction, leaving the debtor holding the bag for the difference between the sale price and remainder due on the lease or contract.
A deficiency judgment (also spelt deficiency judgement) is a judgment lien against a debtor, defendant or borrower whose foreclosure sale did not produce sufficient funds to pay the mortgage in full. This option may or may not be available to the lender, depending on whether they have made a recourse or nonrecourse loan.
The fuller, New York statutory definition is this: “the whole residue, or so much thereof as the court may determine to be just and equitable, of the debt remaining unsatisfied, after a sale of the mortgaged property and the application of the proceeds, pursuant to the directions contained in such judgment, the amount thereof to be determined by the court as herein provided.
The plaintiff’s attorney (in other words, the bank’s lawyer) must make a motion to receive such a deficiency judgment. Otherwise, the amount gained from the sale shall be deemed the full amount owed, and the plaintiff has no right to collect the additional debt. However, if the parties (mortgagor and mortgagee) have already agreed in their mortgage or promissory note, then the debtor could be liable for the full amount.
A debtor who has a deficiency judgment should see an attorney for possible remedies, including bankruptcy, an exemption from creditors, an appeal, or a motion. As with all legal research sources on-line, Internet users should take caution before applying such advice to your own case, and perhaps should consult an attorney, barrister, or solicitor.
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This glossary post was last updated: 27th April, 2020 | 0 Views.