Pennsylvania Laws on Deficiency Judgments

If you've recently gone through a foreclosure in Pennsylvania, you might be wondering about a deficiency judgment and how it could impact you. A "deficiency judgment" results when the foreclosure sale price doesn't cover the full amount of your mortgage debt, leaving you responsible for the remaining balance.

As a judicial foreclosure state, Pennsylvania has specific laws governing deficiency judgments, including a strict time limit and fair market value considerations. Understanding Pennsylvania's deficiency judgment laws will help you protect your rights and minimize or avoid liability after foreclosure.

What Is a Deficiency Judgment in a Pennsylvania Foreclosure?

A "deficiency judgment" is a money judgment for the difference between the borrower's total mortgage debt and a lesser foreclosure sale price.

How Deficiency Judgments Work in Pennsylvania

The lender must file a separate action (a supplementary proceeding) to recover a deficiency following a Pennsylvania foreclosure. (42 Pa. Cons. Stat. § 8103(a) (2025).)

What Is the Statute of Limitations for a Deficiency Judgment After Foreclosure in New Jersey?

The lender has to file the suit within six months after the execution (signing) and delivery of the sheriff's deed. (42 Pa.C.S. § 5522(b)(2) (2025).)

Fair Market Value and Its Role in Pennsylvania Deficiency Judgments

If the foreclosing lender buys the property at the foreclosure sale, the deficiency is limited by the property's fair market value. (42 Pa. Cons. Stat. § 8103(a) (2025).)

For example, say the mortgage debt is $300,000, and the lender bids $250,000 at the foreclosure sale. The lender's credit bid is the highest bid, and it becomes the new owner of the home. In this scenario, the deficiency is $50,000 ($300,000 minus $250,000). So, under Pennsylvania law, the lender could file a subsequent action to recover the $50,000 deficiency. But if the property's fair market value is $275,000, then the lender can obtain a deficiency judgment for only $25,000, which is the total debt less the fair market value ($300,000 minus $275,000).

This limitation aims to prevent a lender from making an artificially low bid to create a large deficiency that it would then try to collect from the borrower.

How to Dispute or Challenge a Deficiency Judgment in Pennsylvania

When the lender files its action for a deficiency judgment, it must ask the court to determine the property's fair market value. The lender will present evidence that the home's value is as low as possible, which would maximize the borrower's deficiency liability. (42 Pa. Con. St. § 8103(c) (2025).)

So, it's a good idea for you (the borrower) to file an answer and present evidence showing that the fair market value of the property is as high as possible to minimize the potential deficiency liability. The court will then hold a hearing on the issue. You'll need to attend the hearing and present your evidence. The court will then determine the property's value. (42 Pa. Con. St. § 8103(c) (2025).)

Will the Lender Sue Me for a Deficiency Judgment?

Deficiency Judgments After Short Sales in Pennsylvania

In a short sale, the homeowner sells a property for less than is owed on the mortgage. The lender agrees to accept this "short" amount in exchange for releasing the mortgage lien. Unless the lender agrees to add a provision to the short sale agreement that states the transaction fully satisfies the mortgage debt, the lender retains the right to get a deficiency judgment.

But the lender doesn't automatically get a deficiency judgment against the borrower. The lender must file a lawsuit to get the judgment. If you intend to complete a short sale and want to avoid the risk of being sued for the deficiency, ask your lender to include language in your short sale agreement that you won't be liable for any deficiency after the short sale closes.

Deficiency Judgments After Deeds in Lieu of Foreclosure in Pennsylvania

A deed in lieu of foreclosure is a transaction in which the homeowner deeds the title to the property directly to the lender. In exchange, the lender agrees to release the mortgage lien. In most instances, a deed in lieu will fully satisfy the debt, but a deficiency could happen with this type of transaction. If the deed in lieu documents clearly state that a deficiency exists and the amount, the borrower remains liable for the deficiency.

Generally, with a deed in lieu, the deficiency is the difference between the home's fair market value and the total mortgage debt. To avoid liability for this amount, ask the lender to agree that the transaction completely pays off the debt. Be sure to get this agreement in writing. You might have tax consequences if the lender forgives all or some of the deficiency.

With both deeds in lieu and short sales, it's possible to negotiate a reduced deficiency or pay a lump-sum settlement regarding any remaining debt associated with the transaction. You might also consider filing for bankruptcy. Bankruptcy might not be a good idea if a deficiency is your only debt, but eliminating your liability for this amount is an additional benefit if you're already considering declaring bankruptcy.

The Impact of Deficiency Judgments on Borrowers in Pennsylvania

A deficiency judgment can potentially have a major impact on a mortgage borrower. The lender might get a wage garnishment, place liens on other properties the borrower owns, or levy the borrower's bank accounts, creating a financial hardship.

Again, in some cases, a borrower might decide to declare bankruptcy to discharge the debt.

Getting Help With a Foreclosure in Pennsylvania

If you're a Pennsylvania homeowner who's behind in mortgage payments and want to learn whether the lender is likely to seek a deficiency judgment, if you have any defenses to the foreclosure, or if you need information about filing an answer in a deficiency judgment action, consider talking to a lawyer.

It's also a good idea to speak to a HUD-approved housing counselor to learn about foreclosure avoidance options.