Legal Question in Bankruptcy in California

If this is a second mortgage and the value of the of the home is worth less than the balance on the first mortgage, then you might be able to remove the lien in a Chapter 13 bankruptcy. Bankruptcy cannot be used to modify the first mortgage on a debtors residence and Chapter 7 cannot be used to remove a mortgage or other voluntary lien.

When you file for bankruptcy protection, you must list all your liabilities. In a literal sense you have to file bankruptcy on everything. However, different types of debt are treated differently. Unsecured loans, such as credit card and medical bills, can generally be discharged (canceled) through bankruptcy. There are certain debts called priority debts, which cannot be discharged for public policy reasons. In your question, you refer to a secured loan, meaning the obligation is secured by the collateral, your house. Assuming the lender has a properly recorded lien interest, they can take the property if you default on payment. A bankruptcy discharge would cancel your personal obligation on the loan, meaning the lender could not sue you to collect on it. However, notwithstanding the bankruptcy, the lender would maintain its security interest in the property and could still foreclose upon it. They'd pursue foreclosure if you're not current on payments and they could yield foreclosure-sale proceeds after senior liens were paid off (i.e. your primary mortgage or other mortgages you have). However, in limited circumstances, you can avoid (remove) such a voluntary lien through bankruptcy. Certainly consult a local bankruptcy attorney in your area to discuss your options.