In this case, the trustee can abandon the property. If the property is exempt or abandoned, it is no longer subject to the bankruptcy, although the petitioner may still benefit from the protection of the automatic stay which prevents anyone from bringing an action against a petitioner while the bankruptcy proceeding is pending. After the petitioner's property has been divided among the petitioner's creditors, and those debts which can be satisfied have been satisfied, the petitioner is discharged. This means that the creditors cannot look to the petitioner for payment of any remaining debts. This discharge of the petitioner has nothing to do with the petitioner's property.
State law determines the effect of any liens recorded against the petitioners property.
The effect of all this is that if property is deemed exempt or abandoned or if the petitioner is discharged and retains title to the property, any recorded liens are still attached to the property and must be reckoned with. In most instances whatever equity the petitioner has in the property will be protected by the declaration of homestead. Had the equity exceeded the amount of equity protected by the homestead, the trustee would have probably used it to satisfy the creditors. The free and clear part is intended to make the property more attractive to a potential buyer, assuring the highest price and getting the most money to satisfy the greatest number of creditors. Remember, a bankruptcy relieves the discharged petitioner of his debts.