What Is A Deficiency Judgment And Are They Permitted In Louisiana?

In another article I recently discussed the process of foreclosure in Louisiana.  When a house is sold at a foreclosure sale the sale has to pay for more than just the balance owed on the mortgage.  It must pay for the attorney’s fees of the creditor’s attorney, the court costs for filing the foreclosure suit, costs to advertise the sale and a sheriff’s commission for conducting an auction of the property.  As a result, it is common that there is not enough money to pay all of these expenses and still pay the entire amount of the mortgage.  When this happens there is an amount known as a deficiency due on the mortgage.

Louisiana is a state that allows a creditor that is still owed money after a foreclosure sale to go after the debtor/borrower for the balance due in a deficiency proceeding and obtain what is called a deficiency judgment.  Once a deficiency judgment is obtained the creditor can then go after other assets that the debtor may have, such as bank accounts or wages of the borrower.

In order to give borrowers some protection from abusively low sale prices in foreclosure proceedings, Louisiana enacted the “Deficiency Judgment Act” to make sure that a debtor is given notice of the foreclosure sale and the benefit to have the property appraised by an appraiser of his own choice before the sale.

If the creditor fails to give the debtor notice of the sale or notice that the debtor has a right to get his own appraisal and the property is sold, then the creditor cannot later obtain a deficiency judgment against the debtor.

If you have property that is going to a foreclosure sale, speak with an attorney right away.  He can offer options to you that may allow you to keep your house.