If discharged you notify the trustee and he will order them to remove you from the debt and you tender the property to the mortgage holders. 

@Jon Holdman so do nothing, let everything fester in muddy, contaminated water, and then have the restoration company come out once the tenant is discharged from the hospital and has had everything removed? 

The whole purpose of bankruptcy is to be discharged from the debt.

Once the BK is discharged the banks can continue to foreclose or short sale.If a sale date is not yet set you have a good chance to get a short sale approved.

But not before it was discharged completely, presumably due to a fire.

Also, gray water can be discharged legally in some areas.

“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.

They filed bankruptcy which delayed the process and the actual discharge wast' until June of 2016.  

And that's just some of the planning stage.I won't even get into the 25 or 30 different permits you'll be required to obtain, their costs and their impact on your budget.Now think about the Federal regulations that are in place from Wetlands to Flood Plain Issues to Storm Water Management to National Pollutant Discharge Elimination Systems to Erosion Control during the construction/development phases.

Tenant then lost job and refiled for chapter 7 asking courts to discharge all debt.