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The fact that the mortgage debt was discharged in the Bankruptcy means she is no longer legally liable for paying that mortgage. In spite of what the lender is telling her - and they do tend to lie - the lender cannot legally take anything from her because of this mortgage.
However, the fact that the mortgage was discharged does not mean the property is free, as the mortgage is and was secured by the property.
This means that since she still owns the property - because it has not yet been foreclosed - she can sell it if she can sell it for enough to pay off the mortgage, or if she can get permission from the lender to sell it for less than the mortgage (called a "Short Sale").
If the lender no longer has a lien on the property, and if there are no other liens on the property, she can sell it, and just keep the money.
The buyer's mortgage company will check the title to see if there are any liens. If they determine there are no liens, the buyer should be able to get a mortgage for the house.
Will the lender have any recourse?
In your opinion, how do you think we should handle this?
Is the tenant's name also on the deed?
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Is it the lender calling her, or a collection agency?
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