My home in Colorado recently foreclosed and went to auction in May 2011. I had a first and second on the property. The first was taken care of in the auction however the second was sent to Alliance One for collection or how they refer to it as "negotiation". They want to settle for about 50% of the debt amount or start a payment plan for the full amount. Am I liable for this loan/debt? What is the best thing to do in dealing with this debt?

Yes, you are 100% liable for the entire amount. Just because they are willing to negotiate doesn't mean they can't change their mind before you sign an agreement. Many lenders don't negotiate.

I would have a real estate attorney review the actual loan documents and the 2nd mortgage, along with the foreclosure auction. *** perhaps a bankruptcy and a bankruptcy sale would have been a better option. Which is why people need to consult an attorney before foreclosures.

But have it reviewed to see what legal options there are