What is a “deficiency claim”?

A deficiency claim is a legal term for a claim a creditor (person or business to whom you owe money) can make if they are not paid in full for an item they have sold or loaned to you. This usually happens when the collateral you have given as security for the loan (like a car or house) is sold for an amount that is less than what you owe. For example, if you owe $10,000 on a car loan but the car is sold for $5,000, the creditor has a deficiency claim for the remaining $5,000. Texas law gives creditors certain rights in such situations. Before a creditor can make a deficiency claim, they must first give you written notice of your default and provide you with a written statement explaining your right to dispute the deficiency claim. If you dispute the claim, you have the right to have the court decide the amount of the deficiency. If the court finds the claim unreasonable, the amount of the deficiency is reduced. Creditors also have the right to file a lawsuit against you to recover the balance of the deficiency. If the court finds in the creditor’s favor, you may be required to repay the full amount of the deficiency or you may be allowed to make payments over time. If you fail to make any payments, the creditor may be able to seize your assets such as wages, bank accounts, or other property.

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What is a “deficiency claim”?

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