California has strong anti-deficiency protections. After foreclosure, you may not owe anything—even if the property sold for less than you owed. Here's what you need to know.
A "deficiency" is the difference between what you owed and what the property sold for. California limits when lenders can pursue you for this balance.
If your loan was purchase money on your residence and foreclosed non-judicially (trustee sale), you're fully protected. The lender cannot come after you personally for any deficiency.
Your protection depends on several factors:
Loan used to buy 1-4 unit owner-occupied residence, foreclosed via trustee sale. Full protection under 580b AND 580d.
Even refinance or HELOC, if foreclosed non-judicially. 580d protects against deficiency.
If lender approved the short sale in writing and you have an agreement waiving deficiency. 580e applies.
If lender chose judicial foreclosure (through courts), they can seek deficiency judgment—but must prove fair value.
If lender sold the debt to a collector who sues on the promissory note (not foreclosure), anti-deficiency may not apply.
Non-owner-occupied property may have different rules. 580b protection is more limited.
Some lenders try to get borrowers to waive anti-deficiency protection. Be careful:
Junior lienholders wiped out by senior foreclosure may still sue you on the underlying note—this is NOT a deficiency action under 580d. However, 580b purchase money protection may still apply if the junior was also purchase money.
If a lender or debt collector sues you after foreclosure:
Even if you're protected from deficiency, you may receive a 1099-C for canceled debt. This is a tax issue, not a collection issue:
Consult a tax professional about your specific situation.
Only if:
If protected by 580b or 580d, they cannot sue you at all—no lawsuit, no judgment, no garnishment.
This is nuanced:
Bottom line: if foreclosed by trustee sale, you're protected. If judicial foreclosure or debt lawsuit, it gets complicated.
Yes, if properly handled:
If you're worried about deficiency, consult a bankruptcy attorney about whether filing makes sense.
I defend against improper deficiency claims and can help you assert your anti-deficiency rights. Don't pay money you don't owe.