What term describes the creditor's claim for the deficiency after collateral sale does not cover the debt?

• A. Interest arrears.
• B. Garnishment claim.
• C. Secured deficiency.
• D. Deficiency claim.

Answer: (D)

When a secured loan is backed by collateral, if the sale of that collateral doesn’t fully pay the debt, the remaining balance is the deficiency. The creditor’s right to collect that remaining amount is called a deficiency claim. This term specifically refers to the claim the creditor asserts for the shortfall after the collateral has been sold.

Interest arrears would be unpaid interest owed, not the remaining principal balance. A garnishment claim involves a legal action to seize a debtor’s wages or other assets from a third party, not the shortfall on a secured debt. “Secured deficiency” isn’t the standard term used; the formal term for the creditor’s claim to the shortfall is deficiency claim.