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Yea they have claims to it but they may not have the first position. The property owner may have got a mortgage, or have used it for a collateral in another loan.

You are supposed to look at the existing interests in the property before signing a Jeonse but not everyone does that. Besides there are fraud schemes that involves property owner going into debt just before you sign which is pretty bonkers.

In a just world where housing was treated as the basic necessity it is instead of a commodity or investment opportunity, this is how it would work.

Second position. Tenants will likely lose the difference between the market value and the outstanding balance plus jeonse.

I was in a similar position and was advised against waiting for the property to be auctioned off and try to buy it myself.

Note: outside of a few neighborhoods, most apartments in Korea don't really appreciate in value. People want to buy new.