I’m not a lawyer, but I am a big law geek, and this is general enough that I feel qualified to answer it.
The automatic stay in bankruptcy prevents certain actions from being taken against a debtor, including foreclosure. The statement in the letter basically says that a bankruptcy filing either will not protect or no longer protects the property from foreclosure, and is simple boilerplate to address any response the recipient may prepare along the lines of “but I filed bankruptcy”.
I received a call from a person interested in seller her property to me. She faxed me a letter from her lender that reads, “Our records indicate that your mortgage loan is in default. Our records further indicate that you have been discharged from personal liability for this mortgage loan as a result of a Chapter 7 or 13 bankruptcy proceeding or that Wells Fargo NA has obtained an order granting it relief from the automatic bankruptcy stay.”
When a person files for bankruptcy there is an automatic stay (stop order) on collection efforts against the debtor, the borrower in this case. This includes all foreclosure actions.
The bank will make a motion to the bankruptcy court for relief from the stay, which is almost always granted so they can finish the foreclosure. The net effect is that the foreclosure will proceed, but the bankruptcy wipes out any liability the borrower would have for a deficiency.