Continue trying to settle 2nd or Chapter 13

[WellsWellsWells]

Have a 1st w/Wells Fargo HM of 344K, house is worth 330K. Interest rate is good but have a 2nd with Wells Fargo Bank (Equity Line HELOC) for 170K. 1st payment adjusted to P&I from I/O. stopped paying on the 2nd. Offer Wells Fargo Equity 17K from my IRA as a settlement. Negotiator said they would take that if it was a short sale but would take less than 50% on a settlement. I am now 60 days late on 2nd. Looking for feedback on the following:

How quickly can they charge off my 2nd (just after NOD- 90 days in CA, or further out)?

The longer they get non-paid will they be more apt to settle?

I am concerned that if I let it hang out there then they will charge off my debt in lieu of doing a Chapter 13 where I may be able to lien strip my 2nd (since it is fully insecured)

Any feedback. Want to keep the house but cannot afford much more than the newly adjusted 1st?

[snapple candy]

Wells, if they charge it off so to speak, it will most likely go to a slimy debt collector. If you have a job, they can garnish. Not sure how long it takes to pas this over to a debt collector and get a judgement. YOu should know since you will be served (hopefully) and know when it is coming. I would suggest talking to a few BK attorneys to review your options and be ready for what might come your way.

I am hearing lenders going to 20% (this is what my attorney told me) and sometimes others a few months ago below down to 10%. Problem is you have already achieved first with decent rate. As a last resort, Have you considered asking them for a modification on your second? In that event, they probably wont write down much, only extend the terms.

If it were me, I would hold out and tell them you are considering filing BK and see if that gets them to consider a pay off. Your 401k is protected in BK so may reconsider using that if you can strip the 2nd? You may have to take this one right to the edge to see what they will do.