If your second mortgage is essentially unsecured you can file a Chapter 13 and treat the mortgage as an unsecured debt and eliminate it!  One year after you start your Chapter 13 there are programs that let you refinance to a lower interest rate which in 2007 was about 6.75.   If you file a Chapter 7 you should wait 2 years after discharge or 3-5 years after a foreclosure when you can get the same rates as the best credit scores get.     

Many people have mortgages that are 125% over the value of their home.   Others have homes with mortgage rates that are double the prime mortgage rate.  You are far better off letting a home go back in foreclosure!  By filing a simple answer in your foreclosure you can extend the time it takes to foreclose by months and in some cases 1-2 years before it will reach a foreclosure sale and you have to move.  It normally takes 2 years after a bankruptcy or 3-5 years after a foreclosure is finished before you can buy a home if you want a prime lending rate.  

It is essential that you use an attorney that knows and plans with you what to do.   In 2007 the lowest prime mortgage rate was about 6.5% for a 30 year mortgage.  Higher rate mortgage companies will lend to you before 2 years but you should wait to get the lower rates.   There are B, C and D market mortgages but these are much higher rates and they cost dearly in the long run. 

Your bankruptcy alone can not be used to deny you a prime mortgage under FHA VA and other federal and state guidelines if you wait the required periods of time  after a bankruptcy or during your Chapter 13.   The myth that you can’t buy a home after a bankruptcy or refinance or buy a home while you are in a Chapter 13 isn't true. 

If you choose to fight a foreclosure and stay in the home while a foreclosure is pending you can often save up the 1000 a month you would have spent on house payments and apply it directly to the principle for a new home. 

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