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 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 years after a foreclosure is finished before you can buy a home if you want a prime lending rate.  

If a foreclosure is part of your bankruptcy it will take 3 years before you qualify for a prime mortgage.  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 the two-three years to get the lowest rate which is called a prime rate.   There are B, C and D market mortgages but these are much higher rates and it costs 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 2 years after discharge and 3 years after a foreclosure.   The myth that you can’t buy a home after a bankruptcy isn’t true.  During that year or two you can save up the 1000 a month you would have spent on house payments and apply it directly to the principle for a new home.  When just a year is over you would have saved up 12,000 dollars as a down payment if it takes 2 years to foreclose the home you would have saved up 24,000 as a down payment on a different 69,500 dollar home and it would be almost half paid for.  

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