What is a deficiency judgment in a foreclosure?

A deficiency judgment in a foreclosure in Texas describes the legal action that a lender can take if the proceeds of a foreclosure are not enough to make up for the amount of the loan that remains unpaid. In other words, if the home is sold for less than what is owed on it, the lender can file a deficiency judgment in foreclosure and sue the former homeowner for the difference. This kind of legal action is also known as a “deficiency suit” or a “deficiency action.” When a deficiency judgment is granted, the former homeowner is responsible for the difference between what is owed on the loan and what the home sold for in the foreclosure. If the former homeowner does not pay the deficiency amount, the lender can pursue collection methods such as wage garnishment or even foreclosure again. The deficiency judgment can only be granted if the former homeowner has been given the opportunity to respond to the lawsuit and/or has been served notice of the lawsuit. Additionally, the deficiency judgment usually cannot be requested if the former homeowner requested a judicial foreclosure rather than a non-judicial foreclosure. In Texas, deficiency judgments are governed by the Texas Property Code section 51.002 which outlines the parameters of a deficiency judgment in foreclosure. It is important to consult a legal professional if you have questions about the foreclosure process and what your options are in regard to a deficiency judgment.

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