All the karma gets burned and one is freed.

Yog of Knowledge and Action 
Chapter 4, Verse 36
 
api ced-asi pāpebhyaḥ 
sarvebhyaḥ pāpa-kṛtamaḥ 
sarvaṁ jñāna plavenaiva 
vṛjinaṁ santariṣyasi
 
Even if you are the greatest doer of sin beyond all sinners, you shall cross over all the crookedness of evil in the ship of knowledge.

 
The lives of Angulimala, Valmiki and St. Paul the Apostle reflect very much what is mentioned here. Krishna says that those who have surrendered to God, to the Master’s Feet, even if they are great sinners, who don’t have any knowledge of the Self, they will succeed in attaining this knowledge. They will automatically and immediately be redeemed of their sins. Through the Grace of the Master, the divine virtues will awaken in them. They will renounce all sinful acts and they’ll be free. When people take shelter at the Lotus Feet of the Master, even if they are sinful, the Master’s Grace will redeem them. It’s like the Master takes them from the boat which is taking them to Hell, pulls them up and puts them in the boat which will take them to Heaven.
 
The story of Angulimala is very beautiful. He was a terrible criminal who used to cut off the little fingers of everybody who was going into the forest and he would steal everything from them. Everybody was scared of going into the forest. One day when Buddha was passing by, Angulimala went to attack him. Buddha offered him his finger to cut off and he was taken aback thinking, “Why is this one giving me his own finger to be cut off? I have never met somebody like this!” At that moment, through the Grace, he asked, “Why are you not scared of me?” Buddha said, “Well, why should I be scared? Who will you kill? I’m not scared of dying, you can’t kill me. Do you want this little finger? Take it! Do you want to kill me? Take my life! But will you be free? No, you will not be free!” At that moment, Angulimala realised that whatever he had done in his life for happiness hadn’t led him anywhere. He surrendered at the Feet of Buddha, and through the knowledge of the Self, he was freed.
 
It was the same for Valmiki. He was also a terrible criminal, a thief, who had killed many people. Yet he got the Grace of his Master, Narada, and by surrendering to Him, he received the Grace to write the Ramayana. St. Paul, the Apostle, who was killing all the Christians, got enlightened by surrendering to Christ.
 
“... you shall cross over all the crookedness of evil in the ship of knowledge.” Krishna says that the one who is surrendered, even if one has a lot of sins, a lot of arrogance, and a lot of bad karma, through the act of surrendering to the Feet of the Master, by the Grace of God, through the Master, through the Guru, one is freed. Because the Master gives the knowledge of the Self. He gives you the sadhana to do, and when you start focusing on your sadhana, all the past karma will be erased. Furthermore, if one has the knowledge of the Self, Brahma Jyaan, by focusing on the Divine and seeing Lord Narayana Himself inside oneself, one will stop creating any more karma. All the karma gets burned and one is freed.

Bhagavad Gita 
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