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Both mortgages can be discharged in a Chapter 7 Bankruptcy - whether or not the value of the home is less than the balance on the first mortgage.
However, a second mortgage lien (or home equity loan lien) can only be removed in a Chapter 13 Bankruptcy.
If the home is worth less than the first mortgage.
And neither a Chapter 7 nor a Chapter 13 Bankruptcy can remove a first mortgage lien.
So, if I understand correctly you are saying that the debt is gone however the lien survives?
Both liens survive.
If they sell the home in the future how would this apply?
It will be hard for them to sell the home with liens on it - as the buyer will not be able to get a mortgage.
So the debt will eventualy have to be satisfied?
If the home goes back up in value can the home equity provider start collection proceedings?
If the home ever increases enough in value that the balance of the first mortgage is less than the value of the home, then the second mortgage company can foreclose the house.
The second mortgage company cannot commence collection proceedings without foreclosure.
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