What is the point of people being allowed to declare themselves bankrupt?

batteryacid asked: Is it a tool to stimulate the economy, because so many people mismanage their money and too many people in debt would create a freeze in spending and enterprise?

I ask because it seems unfair that people who take on the responsibility of credit can just declare themselves bankrupt,
with light penalties, such as not [...]

What happens to a second mortgage when a home is purchased at a foreclosure auction?

buad0118 asked: I am going to bid on a house at foreclosure and it has a 1st mortgage of $280K and a second of $70K. The lender on the first two mortgages is Decision One Mortgage. The lender at foreclosure is Countrywide. Does this mean that if I buy this house at [...]