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Simple English definitions for legal terms
deficiency
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A quick definition of deficiency:
Term: Deficiency
Definition: Deficiency means that someone owes more money than they have. For example, if a person borrowed $550,000 from a bank to buy a house, but the bank could only sell the house for $500,000, the person would still owe the bank $50,000. This is called a deficiency. Deficiency can also happen when someone doesn't pay enough money to the government, like the IRS, and they may have to pay extra fees.
A more thorough explanation:
Deficiency is a term used to describe a situation where there is still money owed after a creditor sells assets that were used to secure a loan. This means that the amount received from the sale of the assets is not enough to cover the full amount owed to the creditor.
- If a person owes $100,000 on their mortgage and the bank forecloses on their house and sells it for $90,000, there is a deficiency of $10,000.
- Another example is if a person owes $5,000 in taxes to the IRS but only pays $4,000, they will have a deficiency of $1,000.
These examples illustrate how deficiency occurs when the amount received from the sale of assets or payment is less than the amount owed. In both cases, the creditor is still owed money even after taking action to recover the debt.