Unfortunately on the facts you have given, the second deed of trust would still be of record and a valid lien against the property. That will prevent you from selling or refinancing the property unless you come to terms with the holder of the second trust deed note. You do not indicate whether the property is worth more or less that the balance of the two loans. You also do not provide any information regarding the terms of either loan. You should seek the advice of a real estate attorney in your area to assist you in evaluating the situation.
This answer does not constitue legal advice, nor does it creat an attorney/client relationship. If you are seeking legal advice upon which you intend to rely, you should hire competent cousel familiar with this area of the law in your locale.
Agree with other counsel, the lien is still good, charge off or lender going out of business doesn't make it go away. You have some options here 1) settle for a lesser amount to remove them from the lien 2) arrange payments 3) this one depends on some more facts: if the value of the property is below the balance on your first mortgage and this is your primary residence you can strip the second mortgage through chapter 13. Whether this is a good option for you will depend on more information. You'll want to consult with a bankruptcy experienced in handling chapter 13s. Ask them how many they've done and how many of those have been successfully confirmed.
Hope this helps and Good luck to you.
If you have some cash on you, you can try to negotiate a settlement with your second mortgage lender. See if the lender will accept less than what you owe as a settlement of the debt in full, but be prepared to pay a lump sum should the bank ask for it. Also, if the value of your home is less than what you owe on your first mortgage, you can look into a Chapter 13 bankruptcy. A Chapter 13 bankruptcy allows you to "strip" the lien of the second mortgage lender. Essentially, after you're done with going through Chapter 13, the second mortgage lender will no longer have a lien against your home. To learn more about this, you need to consult a bankruptcy attorney who wil be able to review your situation and explain to you how Chapter 13 works.