Deficiency Judgment Laws in Georgia

If you go through a foreclosure in Georgia, the foreclosure sale could result in a deficiency. When a foreclosure sale price doesn't cover the borrower's mortgage debt balance, the difference between the total debt and the sale price is called a "deficiency." So, for example, if a 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 Georgia, if a foreclosure sale results in a deficiency, the lender may get a "deficiency judgment" against the borrower for the deficiency amount. However, Georgia law requires the lender to follow specific post-sale procedures. Otherwise, it can't get a deficiency judgment.

What Is a "Deficiency Judgment" After a Foreclosure Sale?

If state law allows it, the lender can seek a personal judgment against the borrower to recover the deficiency after a foreclosure. This kind of money judgment is called a "deficiency judgment."

In some states, the lender may ask for a deficiency judgment as part of a judicial foreclosure. In other states, the lender has to file a separate lawsuit against the borrower after the foreclosure to get a deficiency judgment.

But if the sale price equals or exceeds the mortgage debt amount, you won't have to pay a deficiency judgment because no deficiency exists. In fact, if the sale results in surplus proceeds, that extra money might go into your hands following the foreclosure auction.

On the other hand, if the property had any junior liens, such as a second mortgage or home equity loan, or someone recorded a judgment lien against the property, those parties get first crack at the money to pay off the amount they're owed. Then, any funds left over after paying off these liens belong to the foreclosed homeowner.

How Does the Lender Collect a Deficiency Judgment?

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.

Does Georgia Allow Deficiency Judgments?

Again, yes, Georgia generally allows deficiency judgments after foreclosure.

What Are the Legal Requirements for a Deficiency Judgment in Georgia?

Most foreclosures in Georgia are nonjudicial, which means the lender doesn't have to go through state court to foreclose.

The lender could choose to foreclose through the state court system with a judicial foreclosure. However, in states with a nonjudicial process, lenders almost always choose this route rather than pursuing a judicial foreclosure because an out-of-court foreclosure is relatively quick and inexpensive.

Because Georgia foreclosures are ordinarily nonjudicial, this article focuses on laws about that process.

The Lender Must File a Report of Sale to Get a Deficiency Judgment in Georgia

To get a deficiency judgment after a nonjudicial foreclosure, the lender must file a report of sale with the superior court of the county in which the land is located within 30 days after the foreclosure sale. (Ga. Code Ann. § 44-14-161(a)).

If this deadline is missed, the lender can't get a deficiency judgment.

The Court Holds a Hearing to Confirm the Foreclosure Sale

The court will hold a hearing to confirm the foreclosure sale. The lender must serve the borrower with notice of the hearing at least five days prior to the hearing date. (Ga. Code Ann. § 44-14-161(c)).

At the hearing, the court will review a few specific aspects of the foreclosure. The court will check if the sale price was at least the property's fair market value. The court won't confirm the sale unless satisfied that the property was sold for its true market at the sale. (Ga. Code Ann. § 44-14-161(b)).

Also, the court will review the foreclosure procedures. In doing so, the court will look at:

• the notices that the lender sent the borrower
• the foreclosure sale advertisement that the lender published, and
• the regularity of the sale. (Ga. Code Ann. § 44-14-161(c)).

The Lender Must File a Lawsuit to Get a Deficiency Judgment in Georgia

If the court confirms the sale, the lender can file a lawsuit for a deficiency judgment against the borrower. If the sale wasn't proper, the court can order a resale of the property. (Ga. Code Ann. § 44-14-161(c)).

Can You Avoid a Deficiency Judgment in Georgia?

Even if your lender gets a deficiency judgment, you can probably eliminate your liability for a deficiency judgment, like many other dischargeable debts, in a Chapter 7 or Chapter 13 bankruptcy. Or you might be able to raise a defense to the deficiency action, like the lender didn't follow the correct procedures to get the judgment.

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 bother, particularly if you're judgment proof.

Still, you should know whether your lender is allowed to get a deficiency after a foreclosure. And, even if the lender decides not to sue you for a deficiency judgment, it might sell the debt to a debt buyer who might file a lawsuit against you for the deficiency at some point.

Getting Foreclosure Help in Georgia

If you have questions about Georgia'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 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, open 24 hours a day, seven days a week, at 888-995-HOPE (4673).