Legal Question in Bankruptcy in California

The only option may be bankruptcy because they have the right to sue you for the debt. The balance of the first loan that may have remained unpaid after the foreclosure is gone after non-judicial foreclosure (trustee's sale) but the second become an unsecured debt. You should contact a local bankruptcy attorney to discuss bankruptcy and other options. Depending on your financial circumstances you might be able to settle the debt for a lot less than the lender wants but they will probably want a substantial amount up front which you might not have available. The only problem you might have is with income taxes. You might receive a 1099-C (cancellation of debt) and might be liable for income taxes on the unpaid amount. However, there are exemptions under the tax code that might allow you not to pay taxes on that amount, particularly if it was your home and not an investment (rental) property.