The second mortgage holder's debt is now unsecured, they can get a judgment against you for the full amount owed, and potentially garnish your wages and levy your bank accounts. I would strongly suggest seeking the assistance of a local attorney. It may be in your best interest to seek the protection of a bankruptcy. Good luck.
This is not legal advice and is not intended to create an attorney-client relationship. The post is only an opinion. You should speak to a local attorney for further information. The poster is licensed only in New York. Please visit www.friedmanlawpc.com or www.friedmanlawassociates.com for more information about our services.
If the final judgment is for $300,000 and the property is sold for $200,000, then the deficiency exists right then and there. The clock starts from the time of the foreclosure sale against the owner in favor of the bank and the bank has 5 years to try and collect on the deficiency judgment.
Your second mortgage lender may pursue you on the Note personally. However, for practical purposes, I have rarely seen them do this if they determine that you are insolvent.