Lien stripping is not available in chapter 7 so their lien should be valid.
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Yes. While your discharge relieved you of your personal obligation to pay the loan it did nothing to affect the lien they have against the property. That lien will remain in place and effective until you either pay off the amount owed or negotiate some other terms of settlement with the second lender. You may end up regretting having reaffirmed the first since now you are not in a position to walk away from the property if it is underwater and the second will not work with you.
The statute of limitations no longer applies when a debt has been discharged in a bankruptcy. In addition, the statute of limitations does not apply to secured debts because as long as the security (real estate) exists, the lender will have rights to proceed against the title to the property. You selling the property will not destroy the 2nd mortgage - you are stuck with it.
It might be possible to settle the payoff of this loan for a lot less than the amount owed, but you will need to have a lump sum of cash, nerves of steel, and an appraisal showing that the property value will not cover the value of the 1st & 2mortgage balances.
There is no statute of limitations on foreclosure by advertisement of a second mortgage. If they have a valid lien, and you are in default on payments, they can foreclose. Chapter 7 does not strip the lien.
As far as walking away from the first, it depends on how much the first lender will bid in the foreclosure sale. If they bid your full balance, they cannot sue you. Consider short sale.
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