The Creditor’s Right to Foreclose a Mortgage after Bankruptcy

Discharge of a debtor's personal liability by way of bankruptcy does not automatically extinguish or satisfy a lien against real property. As recognized by the United State Supreme Court, ordinarily liens on real property and other secured interests survive a Chapter 7 Bankruptcy.

In general, a mortgage is an interest in real property that secures a creditor's right to repayment. However, unless the debtor and creditor have provided otherwise, the creditor ordinarily is not limited to foreclosure on the mortgaged property should the debtor default on his obligation. The creditor may, in addition to foreclosure, sue to establish the debtors' in persona liability for any deficiency on the debt and may enforce any judgment against the debtor's assets generally.

A defaulting debtor can protect himself from personal liability by obtaining a discharge in a Chapter 7 Bankruptcy. However, such a discharge extinguishes only the personal liability of the debtor. Therefore, a bankruptcy discharge does not affect a lien of mortgage and is not a bar to subsequent foreclosure, but only relieves the discharged bankruptcy from personal liability on the obligation.