If you fail to make payments on a mortgage you may lose your home, but you may also be held liable for any remaining debt after your home has been sold. If the sale of your house does not pay off the balance of what you owe, the institution owning the mortgage may come after you for a deficiency judgment. A deficiency is essentially the balance remaining on the loan after the sale of the property. For example, if a homeowner with a $100,000 mortgage defaults and the bank sells their home for $75,000, there would be a $25,000 deficiency. The owner of the debt may be able to come after a person for the deficiency.
In order for a debt owner to get a deficiency judgment against a debtor in Louisiana, the owner of the debt must file a lawsuit against the debtor in court. In order to find in favor of the owner of the debt, the court must find that the debt satisfied all requirements of the 1989 Louisiana Credit Agreement Statute. See La. R.S. 6:1121. One of the provisions of the statute states “a debtor shall not maintain an action on a credit agreement unless the agreement is in writing, expresses consideration, sets forth the relevant terms and conditions, and is signed by the creditor and the debtor.” A recent case out of Baton Rouge, Louisiana, shows what this language means.
In August of 2007, Kristina Jackson took out a loan for $224,220 with First American Bank, which she secured using a mortgage on a piece of property she owned. Jackson defaulted on the loan, and the bank sold the property in February of 2013. After the sale of the property a deficiency remained. Jackson claims she only agreed to mortgage the property because a First American Officer told her that it was only a temporary mortgage and it would be released within 30 days after the loan dispersed.