If a bank places a judgement on a loan, where the merchandise is returned, sold, and there is still a balance due (that is too much to handle ), is the only solution bankruptsy? The bank does not seem willing to lower payments, and I am staying about 2 - 3 months behind on the note.

A bank cannot place a judgment, only the court can. They must file suit to obtain a judgment.

Is this a balance due after the items return to whom?

This is from a business loan for equipment. Original amount around 36K, now at 29K ( much late fees, etc. ). Never could get caught up. Business is still going, but on a much reduced scale. The bank has taken money out of my acccount to make payments on the loan several times, causing me multiple NSF checks ( they did not cover ), plus $1000s in fees now.
I can't pay the high monthly payment, and am behind on current loan. They would get the equipment, sell it, then apply it to the balance.

The Bank can Reposses the equipment and sell it at auction most likely, you would still be accountable for the balance due after the sale.

Do they have a lien on the equipment?

It's sound like they will take you to court if you done pay the loan up-to-date soon.