If you are filing chapter 13 bankruptcy, under very specific circumstances, you can strip off the security interest held by the second mortgage. First the second line of credit has to be wholly unsecured. That means if the valuations of the house has to be less than the principal amount held by the first mortgage. Also, there are very specific procedural requirements that one must adhere to when attempting to strip of a second mortgage. Notice to the affected creditor must be given and a proof of service must be filled with the Court.
As soon as you file for bankruptcy the second line of credit is affected. It the lender is planning to foreclose your loan then the proceedings is automatically stayed. The lender cannot carry on with the foreclosure proceedings until the bankruptcy petition is dismissed or an order lifting the automatic stay is granted. Again, in situations where the value of the house has decreased and is less than the primary mortgage loan, the second line of credit becomes wholly unsecured and may be stripped off. By stripping off I mean it is converted from being wholly secured to being completely unsecured.
When the discharged is issued the Bank shall release the second mortgage. For example if your property is valued at seventy thousand dollars ( $70,0000.00). The 1st mortgage by way of example is one hundred and fifty thousand dollars ($150,0000.00) and the second line of credit is $200000. Chapter 13 bankruptcy permits you strip of the second line. That is, it will no longer be a lien on your property.