What action(s) does a creditor have against a debtor whose debt exceeds the amount of the property, specifically real estate, seized and foreclosed on and sold at public sale? In Louisiana, the answer is a suit for a deficiency judgment.
A deficiency judgment is a judgment that may be pursued following a foreclosure suit by executory process wherein the seizure and sale of property by a sheriff does not satisfy the debt owed. To bring such an action, the debtor must strictly follow the steps prescribed by law. Those requirements include a lawful seizure and sale of the property through a foreclosure by executory proceeding, wherein the sheriff sells the property at public sale with appraisement for at least two-thirds of the appraised value. A creditor, unless specifically excepted therefrom by statute, who provokes a sale without appraisement waives any claim it has to a deficiency judgment
Following foreclosure, a creditor may seek to collect from any debtor, guarantor, surety, or any other party obligated to repay the debt under the terms of the loan agreement. Such a suit may be brought in the foreclosure proceeding by converting it to an ordinary proceeding or in a separate suit. Regardless, the defendant is entitled to the delays, including those for appeals, of an ordinary proceeding.
Next, after filing a suit and securing a successful judgment against the debtor, the court will enforce the judgment by a Writ of Fieri Facias. A Writ of Fieri Facias is an order issued by the court directing the sheriff to seize and sell the property of the debtor located within the parish. A creditor who has the court issue a Writ of Fieri Facias should inform the sheriff of any property within the parish that belongs to the debtor in order for it to be seized.
After the seizure of the debtor’s property by a Writ of Fieri Facias, the sheriff may proceed to sell the property seized by public sale. The public sale of the property must be with appraisement, and, again, the property must sell for two-thirds of the appraised value. The priority of the seizing creditor is significant as the sales price must satisfy all superior credit claims and sheriff’s costs prior to the seizing creditor collecting any sums.
If you have any questions regarding foreclosures, deficiency judgments, or commercial property, please contact Joseph Marriott at joseph@qtsnola.com or (504)834-7171.