My question involves bankruptcy in the state of: Colorado

Hello! I was discharged from Ch 7 in February 2010. I reaffirmed my first mortgage, but have done nothing with my second. Summary:
$160K First Mortgage with WF- reaffirmed
$99K Second Mortgage with Chase- nothing done
Home value today: $230K
Upside down by: $31K

Chase is threatening collections and garnishment. I don't believe they can do this. They can only buy my first and foreclose or settle/ discharge/ lien. I am hoping to settle for 10%.

Advise? Recommendations? Suggestions? -THANKS!