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1.2.14 Is the Consumer Liable for a Deficiency After the Sale?

If the foreclosure sale price is not sufficient to satisfy the mortgage debt, the lender may be able to obtain a deficiency judgment. Some states have placed restrictions on deficiency judgments, such as requiring that the borrower be given credit for the “fair value” of the property regardless of the foreclosure sale price. Certain states set strict time limits for bringing deficiency claims or set other procedural requirements for pursuit of them. Other states, by statute, do not permit deficiency claims at all after non-judicial foreclosures. Courts have also limited deficiencies on equitable grounds, when the foreclosure sale price was found to be inadequate. Even if a lender obtains a deficiency judgment, it is an unsecured debt which can be discharged in bankruptcy. See § 10.4, infra.