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deficiency judgment

   Also found in: Legal, Wikipedia 0.01 sec.
deficiency judgment

A lawsuit and judgment against a debtor for the remaining balance due on a promissory note after giving credit for any repossessed or foreclosed collateral.

Example:  Sarah has a mortgage for $200,000 on her home. She defaults on her loan, and the bank forecloses. The bank sells the home at a foreclosure auction to a third party who bids only $160,000 because the home has been allowed to deteriorate and needs many repairs. Sarah still owes the bank $40,000 unless she lives in a state that does not allow deficiencies on home loans. The bank may sue Sarah and obtain a judgment for $40,000, called a deficiency judgment.



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46 in late fees The bank notes that: "Barnett is liable for the full payment of all accrued and unpaid interest, including payment of any deficiency between the amount finally adjudged to be due and owing on the consolidated mortgage and the amount realized from the foreclosure sale or sales of the mortgaged property, up to the amount of the guaranteed interest payments, for which a deficiency judgment is being sought by this action against Barnett.
We agreed to forego our claim for a deficiency judgment against the borrowers and guarantors, which we concluded was in our Company's best interest based on our belief that any potential recovery from a deficiency judgment would not significantly exceed, and might even be less than, the costs of obtaining and collecting such deficiency judgment.
This means that if foreclosure is done using the non-judicial method, a second action to recover a deficiency judgment is not allowed.
 
 
 
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