Advice on 2010 Bankruptcy that did not release/forgive HELOC

[Adam Schmidt]

Hello BP Community!

Any advice or additional options would be wonderful here. Some family friends reached out to me for advice as I work in Commercial Lending, but unfortunately this is outside of my wheelhouse. So I am here doing some research in order to try to help. 

The situation: Their residence was purchased in California in 2005, and a HELOC was borrowed in 2007. In 2010, a Bankruptcy was declared, and through the bankruptcy and Save Your Home California Program, the real estate debt was partially written off. The house was not sold so obviously there was no short-sale/lien release.

Fast forward to today. Payments on the 1st mortgage have "been like clockwork" and all was thought to be going well. It was an unpleasant surprise when debt collectors for the aforementioned HELOC began trying to collect on the principal and unpaid interest since 2010. There was no notification that this debt was active since that time, and it was thought that the HELOC was gone through the bankruptcy. At that time the balance was around $30K, but now the unpaid interest over the years has stacked up and a balance of ~$60K is trying to be collected/negotiated.

My questions are:

1. Do the HELOC collectors have a legitimate cause here?

2. It appears they still have the Note and lien, so who's fault is it that the HELOC was not forgiven during the bankruptcy? Should there be some action taken against the bankruptcy attorney/Save Your Home California people for failing to get this debt written-off? Or was this just poor due diligence by my family friends at the time of the bankruptcy?

3. Aside from another bankruptcy, any advice on how to handle this? I'm sure this HELOC was bought for pennies on the dollar, so what are the chances it could be negotiated for $5k-$10K?

Thank you for any advice. I look forward to some responses!