If the net proceeds from the sale of collateral property do not clear the debt, what is the borrower likely to receive?

When a borrower sells collateral property, such as a home in a foreclosure situation, the net proceeds refer to the amount remaining after deducting costs associated with the sale, including outstanding debts on the property. If these net proceeds do not cover the total amount owed on the mortgage or secured loan, this situation is known as a deficiency.

In such cases, the borrower may receive a notice of a deficiency judgment. This notice informs them that the lender may seek to recover the remaining balance that has not been satisfied through the sale of the collateral. A deficiency judgment is a court order that allows the lender to pursue the borrower for the unpaid debt after the sale of the property.

This option is crucial as it addresses the financial implications for the borrower beyond the sale of the property itself, indicating the potential for ongoing liability despite the asset being sold. Other options, while related to various aspects of the loan and foreclosure process, do not specifically address the situation where the sale proceeds are insufficient to satisfy the debt.