What is a deficiency judgment?

A deficiency judgment is a legal order issued by a court that holds a borrower accountable for the remaining balance on a mortgage loan that was not covered by the proceeds of a foreclosure sale. In Virginia, the deficiency judgment is issued when the amount of the loan exceeds the amount of money the lender received from the foreclosure sale. This means that after the sale, the borrower is legally responsible for the unpaid balance. For example, if a borrower takes out a loan of $100,000 to purchase a home but the home only sells for $80,000 after foreclosure, the borrower is legally responsible for paying back the remaining $20,000. In this case, the lender can file a lawsuit and obtain a deficiency judgment from the court requiring the borrower to pay the difference. Deficiency judgments are powerful legal orders since they give lenders the authority to collect on the unpaid balance in a variety of ways, including the right to garnish the wages of the borrower. Additionally, a deficiency judgment can last for up to twenty years in Virginia and can also be recorded as a lien on the borrower’s property, making it difficult to obtain credit or sell the property during that period.

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What is a deficiency judgment?

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