If you make it through this with assets intact and discharging the lawsuit / debt, you need to get your butt to an asset protection lawyer ASAP to discuss a proper operating structure / anonymity trust / other options that may have prevented the lawsuit.

[Note: A more probably alternative is that you have missed something and the property is not the rocket you envision, otherwise the current owner would have no problems handing it off to a PM and still pocket a nice cash-flow.]Another alternative is to seek hard money (expensive) and once you have all units performing, refinance with a conventional lender and pay off the hard money.Another option would be to determine if the Vendor is willing to carry-back 10% of the purchase as a second mortgage (which you will quickly discharge once up and running).  

I have scoured the 'net and not found anything (even on IRS site) as to the process for getting a formal Discharge of the Lien from the feds after the redemption period.There has to be some way to Discharge that could be Recorded; otherwise, during a title search the Fed Lien would still show up and prevent me from selling the house.Has anyone done this before who could opine on the details?

Her BK had been discharged two years prior, she hadn't received a payment since before the BK and the lender didn't pursue foreclosure.

“Drug-related illegal activity” means the illegal manufacture, sale, distribution, purchase, USE, or possession with intent to manufacture, sell distribute, or USE of a controlled substance (as defined in Section 102 or the Controlled Substance Act (21 U.S.C. 8002) or possession of drug paraphernalia.2.Resident, any member of the resident’s household or guest or other person under the resident’s control shall not engage in any act intended to facilitate illegal activity, including drug-related illegal activity, on or near the said premises.3.Resident or members of the household will not permit the dwelling to be used for, or to facilitate illegal activity, including drug-related illegal activity, regardless of whether the individual engaging in such activity is a member of the household.4.Resident or members of the household will not engage in the manufacture, sale or distribution of illegal drugs at any locations, whether on or near the dwelling unit premises, or otherwise.5.Resident, any members of the resident’s household, or a guest or other person under the resident’s control shall not engage in acts of violence, or threats of violence, including but not limited to the unlawful discharge of firearms, prostitution, criminal street gang activity, intimidation, or any other breach of the housing agreement that the other wise jeopardizes the health safety or welfare of the landlord, his agents, or tenants.6.VIOLATION OF THE ABOVE PROVISIONS SHALL BE A MATERIAL VIOLATION OF THE HOUSING AGREEMENT AND GOOD CAUSE FOR TEMINATION OF TENANCY.

That is designed to exclude income from the discharge of debt on principal residences.

They tried to go into bankruptcy a second time to discharge my lien and I had to hire an attorney to beat it back, cost me about $1.5k, and I was able to stick the borrower with $750 of that cost. 

With that being the case, you should build one hell of a war chest and then get that student loan paid down pronto - as has been noted, your ability to carry doesn't properly weigh the risk of owning a non-dischargeable for so long.4.

The mortgage had been discharged in the bankruptcy, but the lender had not completed the foreclosure.

Chapter 13 does not discharge any debts, but rather, establishes a court ordered workout for all debts owed.