You need to have your situation reviewed by an experienced consumer debt defense attorney. We are now seeing (for the first time since the 1980's) collection activity on a significant number of second mortgages (i.e., the "20" in your "80/20").
You cannot ignore the collection activity of the smaller mortgage. Depending on your facts, you may have good grounds to defend against this claim. So I encourage you to consult with an attorney right away.
Skaar & Feagle, LLP maintains offices in Marietta (770 427 5600) and Decatur (404 373 1970), Georgia. The information ("the answer") provided above is for general information and educational purposes only. The answer should not be taken as legal advice for any individual case or situation. Posting the question and reviewing the answer does not constitute an attorney-client relationship. My firm will ask you to sign a written contract prior to the commencement of representation in any attorney-client relationship. Please contact 770 427 5600 or 404 373 1970, if you wish to discuss your situation further. Skaar & Feagle, LLP accepts select consumer rights cases. These cases include, but are not limited to, cases of abusive and unlawful collection activity, debt defense, credit reporting of false or obsolete (old) information, high interest lenders (title pawns, payday loans), debt management plans, and fraud or unfair practices in the sale and financing of automobiles.
The 2nd mortgage lender can sue you on the note. If they have, you should see a bankruptcy lawyer to evaluate your options.
If you find this answer helpful, please mark it here on AVVO as helpful. In answering you, I am attempting to communicate general legal information and am not representing you (and am not your lawyer). Do feel free to call me at 404-768-3509 if you wish to discuss actual representation (the phone call also does not retain counsel; that requires an office visit and appropriate paperwork). In that a forum such as this provides me with limited details and doesn't allow me to review details and documents, it is possible that answers here, while meant to be helpful, may in some cases not be complete or accurate, and I highly recommend that you retain legal counsel rather than rely on the answers here. (You can also email my office at firstname.lastname@example.org . An email also does not retain my office, but can help you get an appointment set if you prefer not to call). I am happy to discuss possible representation with you. Any information in this communication is for discussion purposes only, and is not offered as legal advice. There is no right to rely on the information contained in this communication and no attorney-client relationship is formed. Nothing in my answer should be considered as tax-advice. To ensure compliance with IRS Circular 230, any U.S. federal tax advice provided in this communication is not intended or written to be used, and it cannot be used by the recipient or any other taxpayer (i) for the purpose of avoiding tax penalties that may be imposed on the recipient or any other taxpayer, or (ii) in promoting, marketing or recommending to another party a partnership or other entity, investment plan, arrangement or other transaction addressed herein. I am also required to advise you, if your question concerns bankruptcy, that the U.S. Congress has designated Ashman Law Office as a debt relief agency that can help people file bankruptcy.
When you execute a "mortgage" you're actually doing two (2) things. First, you execute an instrument of indebtedness, typically a promissory note, that make you personally liable on the debt to the bank or finance company. Second, you execute a type of security agreement with respect to the real estate (this is the actual "mortgage instrument", in some jurisdictions called a "deed of trust") that secures your performance under the terms of the promissory note. If the mortgage instrument is subordinate to an existing mortgage instrument on record with the Land Records Office in your area and that superior mortgagee forecloses upon the real estate, all that is left is the original note for the subordinate mortgagee to sue or collect upon. In short, the sale of the mortgaged property by the first mortgagee lender does NOT absolve you from personal liability for the underlying debt to the second mortgagee lender. The only exception to that would be if the promissory note specifically provided that it was a "non-recourse obligation" meaning that recovery by the second mortgagee lender was limited to its collateral ( the real estate). But these types of loans are the exception, not the rule. I would definitely contact an attorney in your local area to review this matter and investigate whether some type of settlement or bankruptcy filing might be appropriate. Best regards!
None of the other answers are actually correct because there are not enough facts to give an answer. For example, if the lenders are the same, forclosing on the first may wipe out the second under some situations. Also, and once again, the idea that bankruptcy is being pushed is not right. Bankruptcy is not always an option, even though a house has been forceclosed and there is not even any mention of the amount of the second debt. Would your BK to avoid maybe a 10k debt???
This is not intended to create an attorney client relationship and none is to be implied either. You must contact an attorney and present all facts before you can and should act on this response