In a foreclosure, a “deficiency” happens when a borrower's mortgage debt is more than the foreclosure sale price. If a foreclosure sale results in a deficiency, some states, such as Pennsylvania, allow the foreclosing bank to get a deficiency judgment.
However, Pennsylvania law restricts how and when a bank may get a deficiency judgment and, under some circumstances, how much the bank can get.
What Are Pennsylvania's Foreclosure Procedures?
To foreclose a Pennsylvania home, a bank has to start a lawsuit in court. Foreclosures that go through court are called "judicial" foreclosures. If the bank prevails in the suit, the court enters a judgment that orders the home sold to repay the bank.
At the sale, the foreclosing bank normally bids on the property using a credit bid. (The foreclosing bank gets a credit up to the amount of the borrower's total debt, so it bids using a "credit bid.")
Other parties can also make bids at the foreclosure sale. If the bank is the high bidder with its credit bid, it becomes the new owner of the home. However, if a third party makes a bid that’s higher than the bank’s credit bid, the high bidder gets the property. The proceeds from the sale then go towards repaying the outstanding mortgage debt.
The difference between the total debt and a lesser winning bid at the sale is the "deficiency."
How to Calculate the Amount of a Foreclosure Deficiency in Pennsylvania
Again, if the bank’s winning credit bid (or a third party’s winning bid) doesn’t fully pay off the outstanding mortgage balance, the difference is known as a "deficiency."
When a foreclosure sale results in a deficiency, some states have laws that allow the foreclosing bank to get a deficiency judgment—a personal judgment against the borrower—for the deficiency amount.
Do Foreclosures Always Result in a Deficiency?
If the sale price equals or exceeds the mortgage debt amount, there's no deficiency. In fact, if the sale results in surplus funds (more than what's needed to pay off any other liens, like a second mortgage or HELOC), you might be entitled to that extra money following the foreclosure sale.
What Is a “Deficiency Judgment” After a Foreclosure Sale?
If state law allows it, the bank can seek a personal judgment against the borrower to recover the deficiency, if there is one. This kind of money judgment is called a “deficiency judgment.”
Are Deficiency Judgments Allowed in Pennsylvania Foreclosures?
Yes. Pennsylvania law allows deficiency judgments.
What Are the Legal Requirements for a Deficiency Judgment in Pennsylvania?
Pennsylvania law allows a foreclosing bank to go after a foreclosed borrower for a deficiency judgment, but not as part of the foreclosure suit. (42 Pa. Cons. Stat. § 8103 (2025).)
The bank must file a petition with the court within six months of the transfer of the deed to the new owner after the sheriff’s sale. (42 Pa.C.S. § 5522 (2025).) And, if the foreclosing bank is the purchaser at the sale, Pennsylvania law limits the amount of the judgment.
Limitation on Deficiency Judgments in Pennsylvania
If the foreclosing bank buys the property at the foreclosure sale, the deficiency is limited by the property's fair market value. (42 Pa. Cons. Stat. § 8103 (2025).)
If a bank files a deficiency judgment petition, it has to ask the court to determine the property's fair market value. The bank will present evidence that the home's value is as low as possible, which would maximize the borrower's deficiency liability.
So, it's a good idea for you to file an answer that presents evidence showing that the property's fair market value is as high as possible to minimize your potential deficiency liability. The court will then hold a hearing, which you should attend, to determine the home's fair market value. (42 Pa. Cons. Stat. § 8103 (2025).)
Can You Avoid a Deficiency Judgment in Pennsylvania?
If your bank gets a deficiency judgment against you, you might be able to eliminate your liability for the judgment (and other dischargeable debts) in a Chapter 7 or Chapter 13 bankruptcy.
Or you might be able to work out a settlement with the bank to accept less than the full deficiency amount and forgive the rest. Generally, however, the IRS considers forgiven debt as taxable income, subject to some exceptions.
Getting Help With a Pennsylvania Foreclosure
If you’re facing a foreclosure in Pennsylvania and want to learn more about deficiency judgments or how to challenge the fair market value in a deficiency judgment action, consider talking to a local foreclosure attorney.
If you need help applying for a way to avoid a foreclosure, like by completing a modification, short sale or deed in lieu of foreclosure, consider talking to a HUD-approved housing counselor.