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A deficiency judgment is a decision made by a court that says a person who borrowed money to buy a house still owes money to the lender, even after the house is sold in a foreclosure. It happens when the money from the foreclosure sale isn't enough to cover the total debt. It's like when you sell something to pay back a loan, but the money you get from the sale isn't enough, so you still owe the rest.
For example, let's say Tom borrowed $200,000 to buy a house, but couldn't make the payments. The bank forecloses on the house and sells it for $180,000. Since the sale didn't cover the full amount of the loan, there's a $20,000 deficiency. The court could decide that Tom is responsible for paying back the remaining $20,000, which is the deficiency judgment.
"Wit & Whimsy with the Dumb Ox: Unlocking Knowledge with Rhyme:"
In the land of loans and homes, where money's often lent,
A thing called deficiency judgment makes its presence felt.
When borrowers can't pay back their loans, and foreclosure's near,
The sale of the house might not suffice, and that's what we should fear.
Imagine Tom, who borrowed cash, to buy a lovely home,
But payments were too much for him, and foreclosure did roam.
The house was sold for less, you see, than what Tom owed the bank,
And so, a court might step right in, and give Tom's debt a rank.
A deficiency judgment comes, to settle up the score,
It says Tom still owes money, a burden he can't ignore.
In this land of loans and homes, deficiency judgments reign,
Reminding us, when debts aren't met, the borrower bears the pain.