1) Bankruptcy in the past does not affect current obligations; if either or both mortgages were not dealt with then, the previous bankruptcy does not matter.2) If they knowingly did not disclose the existence  of the prior mortgage to get the newer one, and then default on the newer one, it's possible they could be referred to the authorities for criminal prosecution on the theory they committed a form of fraud.3) In any event, they could be sued by either mortgage holder for whatever they owe that person/company and don't pay, and which the mortgage holder can't collect. So if, for example, the bank can't foreclose on the property and sell it due to the previous mortgage being in place, the bank could potentially go after your grandparents for the full unpaid value of the mortgage.4) It's not clear they could simply turn the land over to the bank if there's another mortgage on it. (And note: lenders are not required to accept the deed in lieu of payment anyway--it's a voluntary choice to do that.)This is a complicated, messy situation. Your grandparents need to consult with a real estate attorney.