What is a “deficiency claim”?

In Tennessee, a deficiency claim is a legal action a creditor may take to try to recover any portion of a debt that remains after a secured asset has been repossessed and sold. In other words, if a debtor fails to pay a loan secured by an asset, the creditor may have the right to repossess and sell the asset to recover part, or all, of the unpaid loan amount. If the proceeds from the sale are not enough to repay the debt, the creditor can take a deficiency claim to recover the balance. A deficiency claim is brought by the creditor against the debtor in a court. In Tennessee, regardless of where the debt was initially created, the deficiency claim must be brought in the county where the debtor resides. The creditor must prove the amount of debt remaining due after the sale proceeds are applied, as well as other elements of the claim. In some situations, a debtor may be able to challenge the deficiency claim. A successful deficiency claim will result in the court entering a judgment against the debtor for the amount of the deficiency. This means that the debtor must then repay the creditor, and the creditor may be able to take further legal action to collect on the judgment. A deficiency claim can also help the creditor to establish a lien against other property owned by the debtor.

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What is a “deficiency claim”?

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