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Yes, you can do a short sale while in a Chapter 13. There is nothing illegal or impossible about doing that.
Please let me know if you have additional questions.
If you want to keep the property, you would enter into a payment plan that will repay any delinquency in addition to continuing to make the payments going forward.
Also, if you want to rid yourself of the property, you can engage a short sale.
You can only strip the second mortgage to the extent that it is unsecured.
For instance, if your home is worth $200,000 and your first mortgage is $175,000 and your second is $50,000, you could strip $25,000 and you'd have to pay the other $25,000 because the second mortgage is secured up to that amount.
The court must require payment of ALL secured debts. The only debts that you can try to cram down in a 13 are unsecured debts. However, unsecured debts would be paid to an amount equal to the exemptions you have - which are usually significant.