Last week, an out-of-state lawyer and reader of my blog asked a question I’ve received several times previously – whether Indiana has a separate process for post-sheriff’s sale deficiency suits. In this instance, he was reading my 4/22/08 post, How Much Should A Lender/Senior Mortgagee Bid At An Indiana Sherriff’s Sale?, and had some follow-up questions.
My definition. The terminology “deficiency judgment” refers to the amount of the judgment remaining after deducting the price paid at the sheriff’s sale or, more generally, the difference between the debt amount and the value of the collateral securing the debt.
Indiana’s process. It’s my understanding that some states require post-sale deficiency actions. Not in Indiana. Here, a judgment entered in a mortgage foreclosure action typically is comprised of two elements. The first is a money judgment on the promissory note and/or guaranty, and the second is a decree of foreclosure based on the mortgage. The deficiency is a product of the sheriff’s sale. In Indiana, a deficiency judgment isn’t really a technical or statutory term. More than anything, the words simply describe the net amount owed by a borrower or guarantor following a sheriff’s sale.
One judgment. So, as to Indiana, unlike some other states, a personal judgment (against a borrower or a guarantor) for any post-sale deficiency actually occurs before the sheriff’s sale takes place. There is no second procedural step or subsequent process to establish a deficiency judgment. In fact, as noted in my 8/1/08 post Full Judgment Bid = Zero Deficiency, ultimately there may be no deficiency (residual money judgment) if the sheriff’s sale price meets or exceeds the amount of the judgment.