Deficiency Judgment Laws in Louisiana

If you go through a foreclosure in Louisiana, the foreclosure sale could result in a deficiency. When the foreclosure sale price doesn't cover the balance of the borrower's mortgage debt, the difference between the total debt and the sale price is called a "deficiency." For example, if the borrower's total debt is $500,000, but the home sells to the highest bidder at a foreclosure sale for $450,000, the deficiency is $50,000.

In most states, including Louisiana, if a foreclosure sale results in a deficiency, the lender may get a "deficiency judgment" (a personal judgment) against the borrower for the deficiency amount. Generally, once a lender gets a deficiency judgment, it may collect this amount (in the example above, $50,000) from the borrower using regular collection methods, like garnishing wages or levying a bank account.

Deficiency Judgment Laws in Louisiana

To find the Louisiana foreclosure statutes, including those related to deficiency judgments, go to the State Legislature's webpage. Click on "Laws," then select "Table of Contents" (on the left side of the screen) and click on "Code of Civil Procedure." The relevant statutes are in 2631 through 2772, which cover executory proceedings, and 3721 through 3753, which cover judicial proceedings.

Also, you might want to review La. Rev. Stat. 13:4106 and 4107 (the Deficiency Judgment Act). To find the Louisiana Revised Statutes, follow the steps above, but click on "Revised Statutes" rather than "Code of Civil Procedure." The statutes are located in Title 13.

Does Louisiana Law Allow Deficiency Judgments?

Louisiana law allows two types of judicial foreclosure processes: executory and ordinary. The lender can get a deficiency judgment with either an executory proceeding or ordinary proceeding.

How Do Deficiency Judgments Work in Louisiana?

Again, if you go through either type of foreclosure and the sale price isn't enough to cover the balance of your mortgage, your lender can come after you for the deficiency. Here's how the lender gets the judgment.

What Are the Legal Requirements That Must be Met to Obtain a Deficiency Judgment in Louisiana (Executory Proceeding)?

To get a deficiency judgment with an executory proceeding, the lender must either:

• convert the executory proceeding into an ordinary proceeding, or
• file a separate suit for a deficiency. (La. Code Civ. Proc. Art. 2772).

The court may grant a deficiency judgment, provided that the property was appraised before the sale in accordance with state law. (La. Code Civ. Proc. Art. 2771, La. Rev. Stat. § 13:4106).

What Are the Legal Requirements That Must be Met to Obtain a Deficiency Judgment in Louisiana (Ordinary Proceeding)?

In an ordinary foreclosure proceeding, the deficiency judgment is obtained as part of that action.

Can You Avoid a Deficiency Judgment in Louisiana?

If you lose your home to foreclosure and the court orders you to pay a deficiency judgment, you might be able to use bankruptcy to eliminate the debt. Or you might have a defense to the deficiency.

Will My Lender Sue Me for a Deficiency Judgment?

Even if your lender has the right under state law to go after you for a deficiency judgment, it might decide not to do so—especially if you don't have many assets to satisfy the judgment. The lender might decide it isn't worth the expense and effort of getting a deficiency judgment.

Still, you should know whether your lender can potentially pursue you for a deficiency after a foreclosure. Also, even if the lender decides not to sue you for a deficiency judgment, it could later sell the debt to a debt buyer who might file a lawsuit against you for the deficiency later on.

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Getting Foreclosure Help in Louisiana

If you have questions about Louisiana's foreclosure process or want to learn about potential defenses to a foreclosure and possibly fight the foreclosure in court, consider talking to a foreclosure attorney.

It's also a good idea to talk to a HUD-approved housing counselor if you want to learn about different loss mitigation options. You can use the Consumer Financial Protection Bureau's Find a Counselor tool to get a list of HUD-approved housing counseling agencies in your area. You can also call the Homeownership Preservation Foundation (HOPE) Hotline, which is open 24 hours a day, seven days a week, at 888-995-HOPE (4673).