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A deficiency judgment is an unsecured money judgment against a borrower whose mortgage foreclosure sale did not produce sufficient funds to pay the underlying promissory note, or loan, in full. [1] The availablity of a deficiency judgment depends on whether the lender has a recourse or nonrecourse loan.
The State of New York defines deficiency judgment by statute as follows: "the whole residue, or so much thereof as the court may determine to be just and equitable, of the debt remaining unsatisfied, after a sale of the mortgaged property and the application of the proceeds, pursuant to the directions contained in such judgment, the amount thereof to be determined by the court as herein provided."[2]
In New York, the plaintiff's attorney (the lender's lawyer) must make a motion to receive a deficiency judgment. Otherwise, the amount gained from the sale will be deemed the full amount owed, and the plaintiff has no right to collect the additional debt.[3] However, the terms of the mortgage may dispense with the need for such a motion.[4]
A debtor who has a deficiency judgment should seek the advice of an attorney for possible remedies, including a motion, an exemption from creditors,[5] an appeal, bankruptcy, etc.