Louisiana Deficiency Judgments
A deficiency balance is the remaining debt that is owed after a defaulted loan is credited with the net sale proceeds of a repossession or foreclosure. Per La. Code Civ. Proc. art. 2771, a creditor may obtain a judgment against the debtor for any deficiency due on the debt after the distribution of the proceeds of the judicial sale. When a deficiency balance remains, per La. Code Civ. Proc. art. 2772, a creditor may either file a supplemental petition converting the executory proceeding into an ordinary proceeding or may file a new suit altogether. The ensuing money judgment is called a deficiency judgment.
When are Deficiency Judgments Available?
Under art. 2771, deficiency judgments are generally limited to judicial sales in executory proceedings. However, La. R.S. 9:966 specifically permits a creditor to pursue a deficiency after a “self-help” repossession, and La. R.S. 13:4108.2 allows deficiency judgments following a voluntary surrender of collateral. However, each of these situations has strict requirements in order to maintain the deficiency rights.
According to art. 2771 and La. R.S. 13:4106, a sale in an executory proceeding must be with appraisal to preserve the right to a deficiency. The requirement for an appraisal can be waived in the promissory note, but the requirement of an appraisal as a prerequisite to a deficiency cannot be waived under La. R.S. 13:4107. Thus, whenever a home is foreclosed or a car is repossessed by executory process, there must be an appraisal of the collateral if the creditor wants to pursue a deficiency balance following the sale.
In a self-help repossession, an appraisal isn’t necessary, but the creditor must send a “notice of sale” to the debtor prior to the private sale and a “notice of disposition” following the sale which outlines how the net sale proceeds were calculated and what the remaining deficiency balance is. These notices give a debtor a chance to challenge the sale and deficiency rights in the event the collateral is sold at an unreasonably low price. To maintain the right to pursue a deficiency after a voluntary surrender, the debtor must sign a written agreement agreeing to the value of the collateral and agreeing that they are liable for the deficiency.
We work with our clients to pursue deficiency judgments following repossessions and foreclosures. Once a creditor is awarded a deficiency judgment, it may collect this amount from the debtor using regular collection methods, like garnishing wages or a bank account.
New Orleans Collection Attorneys
Bowes, Petkovich & Palmer, LLC is a Gretna law firm that has served the New Orleans area since 1980. Our experienced creditors’ rights lawyers are well versed at handling high volume consumer collections files including deficiency judgments throughout Louisiana, following repossessions and foreclosures. We take pride in offering an effective and efficient experience. Call us today for a free consultation and find out why so many of our clients come back to us.