When an individual is unable to pay debts, he or she may have to be subject to foreclosure. In the event that foreclosure is not enough to pay the mortgage debt, a bank or creditor may obtain a deficiency judgment. The bank or creditor must file a lawsuit against an individual when the foreclosure does not fulfill the necessary repayment. If the bank or creditor does not file a claim with the court of law regarding this issue, the court will consider the foreclosure to be sufficient enough in repayment.
Before a bank or creditor can obtain a deficiency judgment, the legal counsel of the party must file a motion for receiving a deficiency judgment with a court of law. If the party does not do so upon receiving repayment from the foreclosure, the court will determine that the foreclosure satisfied the loan and the bank or creditor will no longer have the right to debt collection. However, it is possible that the terms under the mortgage contract will automatically demand for a deficiency judgment if foreclosure does not satisfy the debt.
Deficiency judgment begins when an individual no longer pays for mortgage. The home is the collateral in the mortgage loan and will be seized by the bank or creditor upon the inability of the individual to continue paying for mortgage. The home is the foreclosed and sold through auction. The amount obtained by the bank or creditor through the auction is used to satisfy the loan payment. If it does not satisfy the terms of the mortgage payments, a deficiency judgment is obtained.