You should consider just walking away with no BK, the other posters are correct – in California if it is a purchase money loan the lender has no further recourse. If you took money out, say for a down payment on the next purchase as you built the portfolio, that is a different story – you will not be able to walk away.
However, depending on your financial situation a BK might work well. Under a Chapter 13 you may be able to “cram down” loans on the rentals to current market value. If your primary residence is a 80/20 you may be able to strip the second mortgage off entirely. There is a LOT of complexity in all this, and you may have to eat Ramen Noodles for 5 years to satisfy the trustee, but perhaps if your wife is working, she can buy the groceries. You may be able to refinance out of the 13 before it runs the full 5 year term.
Get a good BK attorney, AVOID finding a general attorney who is just advertsing BK work because its hot right now.
It is possible that you could own your properties at today’s prices.
