What normally happens is you know you are going to lose your house so you take out a another mortgage based on the value of the home so you can pay off your other debts so you don't lose your car or your possessions. You are going to lose the house anyway so you end up keeping your car and paying off the credit cards.
The last two appraisals that I did were forensic reviews of appraisers who valued garages that weren't built but the money from the loan was going to build said garages. The garages were never built and only weeks after the loan was approved the homes went into foreclosure