Definition
The amount you still owe after a lender repossesses or forecloses on collateral and sells it for less than the loan balance, plus repossession and sale costs. In many states the lender can sue for a deficiency judgment and collect it like any other debt.
Why it matters
Losing the car or house does not always end the debt. A deficiency can follow you for years, be garnished from wages, and sit on your credit report on top of the repossession itself. Some states bar deficiency judgments on primary-home mortgages, so the rules depend on where you live.
Example
A borrower owes $22,000 on a car that is repossessed and sold at auction for $14,000. After $1,000 of repossession and auction fees, the deficiency balance is $9,000, which the lender can pursue in court even though the borrower no longer has the car.
Put it into practice
Related terms
This definition is educational, not financial, legal, or tax advice. U.S. rules and limits change; verify time-sensitive details with official sources. See our disclaimer.