Foreclosures: what is a deficiency judgement?

On Behalf of | Jan 28, 2022 | Real estate litigation |

Facing foreclosure on your home is a terrifying prospect. It’s difficult to make decisions when facing significant financial pressure but that’s exactly what you’ll have to do. So it’s important to understand many of the consequences of foreclosure, including the possibility of a deficiency judgement.

Foreclosure is not necessarily the end

In Ohio, foreclosures proceed through court. The lender files a complaint with the court, alleging that the borrower is behind on payments and it is within its right to foreclose on the property. The lender must notify the borrower and the borrower has the right to contest the foreclosure. If the lender is successful, the court will enter a judgement allowing sale of the property to proceed.

However, what the property actually sells for is not always enough to cover what the borrower owes. When this happens, a deficiency is created. Ohio Code Section 5721.192 gives the lender an opportunity to collect on this deficiency – known as a deficiency judgement. The lender can return to court and request a judgement to that effect. If granted, the lender can now collect the deficiency through normal collection means. These methods can include garnishing the borrower’s wages or placing a levy on their bank account.

It’s important to note that there are legal limits on a deficiency judgement. If a foreclosure sale occurs, the property cannot be sold for less than two-thirds of its appraised fair market value. This minimizes the amount of the deficiency which can result. If you’re facing a foreclosure and need assistance making sound decisions, seek the assistance of a qualified professional to help you navigate the process.