Deficiency Judgment Legal Meaning and Definition

Here is a simplified definition of the legal term Deficiency Judgment.

Deficiency Judgment (noun) : A legal ruling made by a court that stipulates the outstanding balance a debtor owes after the collateral property has been sold. It represents the difference between the sale price of the repossessed property (usually at an auction or sheriff's sale) and the remaining owed debt on the loan or installment contract. This often occurs after foreclosure of a mortgage or a deed of trust. Some states allow lawsuits for deficiency judgments, making the debtor responsible for the remaining debt. Because the sale price can often be lower than the remaining debt, this can leave the debtor with significant financial obligations.