What is a deficiency judgment in a foreclosure?

A deficiency judgment in a foreclosure is a legal ruling in California that allows a lender to recover any unpaid debt from the borrower after their property has been foreclosed. This is a common practice when the selling price of the foreclosed property does not cover the full amount of the remaining loan amount that the borrower owes to the lender. For example, if a homeowner in California borrowed $200,000 from a bank to purchase a home and the home is foreclosed for nonpayment, but the home only sells for $150,000 at auction, the homeowner still owes the remaining $50,000 to the lender. The lender would then file a deficiency judgment in the court requesting the remaining balance of $50,000. If the court agrees, the borrower will be required to pay the remaining balance or the court could garnish the borrower’s wages or put a lien on their other assets to recover the amount owed in the deficiency judgment. When the deficiency judgment is granted, it can be reported to the major credit bureaus and will damage the borrower’s credit score. If the judgment is not paid, the lender can take legal action against the borrower to collect the debt, including wage garnishment. Therefore, a deficiency judgment in a foreclosure is a legal action issued by a court which allows a lender to recover any unpaid debt from the borrower after their property has been foreclosed in California.

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