Bankruptcy proceedings affect the ownership, conveyance and encumbrance of real property as well as the attachment, priority, and enforceability of mortgages, judgments, and liens. Contrary to popular belief, bankruptcy does not automatically discharge the debtor of all debts, nor does it extinguish all judgments and liens filed against the debtor’s property. While the debtor may be personally relieved from liability for properly scheduled pre-bankruptcy debts, pre-petition mortgages, judgments, and other liens continue to encumber the property of the debtor, unless properly invalidated in accordance with specific bankruptcyprocedures.
Bankruptcy proceedings generally fall into one of two categories, prior party or current party:
• Prior party proceedings are those which occurred prior to the current title holder being vested.
• Current party proceedings typically involve the current owner or co-owner who, prior to conveying title to or mortgaging the subject property, voluntarily files a Petition for Bankruptcy.