Posted by JohnBoy on November 16, 2004 at 20:52:15:
The first mortgage does not get wiped out. That is a secured debt and remains as a lien against the property. The only thing that gets wiped out is the seller’s liability to pay the debts owed if he lists them in the BK and has those debts discharged. But the mortgage remains a lien against the property and the lender will still foreclose to take the property to recoup their secured interest. The lender just can’t go after the seller for any amounts owed on the mortgage that is not recovered after foreclosing and reselling the property.
As for any other liens against the property, the only way they could be wiped out is if the seller has those avoided by the BK court. That only happens in a case where the seller was keeping the house in the BK and any liens on the property didn’t exceed the exemption amount the debtor was allowed by law in that state on their personal residence. But since the seller is listing the mortgage in the BK to be discharged then all other liens would remain in tact against the property as a secured debt. Secured debts means the creditor(s) are entitled to get the assets to recover any debts owed. So you would have to deal with any creditors that have a lien against the property to get clear title.