House & Apartment

Sometimes the money from the judicial sale of a home in foreclosure will be less than the value of the mortgage. When this happens, the mortgage company can sue you for the remaining debt owed. This is called a deficiency judgment.

It used to be rare for lenders to sue for the deficiency judgment, however, this is no longer the case. Your lender can sue for a deficiency at the time of the foreclosure or after the sale of the home.

Your lender cannot sue for a deficiency judgment if:

• You have agreed to a deed-in-lieu of foreclosure; or
• You make an agreement with your lender, that after the sale they will not sue to recover the rest of the value of the house.

The only way to get rid of a deficiency judgment is by filing for bankruptcy. A Chapter 7 filing will get rid of a deficiency judgment, but with a Chapter 13, you may have to pay part of it off. To see which type of bankruptcy you may qualify for, use our bankruptcy decision tree.

You should talk with a lawyer about whether filing bankruptcy is a good option for you.

For more information, see the video What happens after the foreclosure sale.