Line of credit caused foreclosure, does older mortgage survive?

[Matt W.]

Hello BP, 

I am a new investor in NC. I have been following a run down property I knew was headed to foreclosure for a few months.  I had an attorney do a title search and he determined that it was a $25k line of credit that originated December 2012 that caused the foreclosure.  However, there is an unsatisfied mortgage for $100k originated June 2006, and the remaining balance is unknown. 

The property "sold" on the courthouse steps this week for only $3000.  My attorney advised that whoever buys the house at auction will be liable for the remainder of the older $100k mortgage.  But I cannot find any case of this in my research and every investor I ask says that foreclosure eliminates all debt, with the exception of taxes.

I am confused and cannot get the attorney to call me back to clarify.  Anyone have any experience with a case like this?  I think the house could flip for close to $200k, so getting it free and clear for close to $3k seems too good to be true...?

Thanks, 

Matt