Jan. 15, 1942 U-132 departed Trondheim, Norway for her second war patrol, she was under the command of Kapitänleutnant Ernst Vogelsang. On the same day USCGC Alexander Hamilton WPG-34 was rendezvousing with convoy HX-170 southwest of Argentia, Newfoundland, she was under the command of Commander Arthur G. Hall, USCG. Hamilton was one of the escorts assigned to sail with the convoy until they reached the point of transfer, where the Royal Navy would meet and take the ships on to their destination. The drop point was reached on Jan. 22, but the Royal Navy did not show up until the 24th due to bad weather. The delay forced several of the escorts to break off to refuel, now the convoy, about 30 ships, was only guarded by Hamilton and USS Niblack DD-424.

After the British ships turned up Alexander Hamilton and Niblack turned and began the trip to Iceland. On the 25th the Hamilton took USS Yukon AF-9 in tow as the former suffered engine failure. Around noon on the 29th they had arrived off Reykjavik, Iceland where they were met by the British tug Frisky, who took the Yukon into port. While the transfer was taking place, Niblack and USS Gwin DD-433 provided screening from U-boat attack.

In January 1942 Admiral Karl Dönitz ordered a group of U-boats to patrol off the U.S. east coast, this was known as Operation Drumbeat (Paukenschlag). It would be a very successful campaign and would teach the U.S. valuable, but costly lessons in U-boat hunting. Lt. Commander Roger Winn, R.N. at the submarine tracking room in London had alerted the U.S. of a concentration of U-boats headed to the east coast (Drumbeat boats) and others located south of Newfoundland, U-132 was one of these boats. However little was done by the U.S. Navy in response to the threat.

A little over an hour after Hamilton had detached from Yukon, KpLt. Vogelsang in U-132 sent four torpedoes speeding toward Alexander Hamilton, one hit her on the starboard side. The damage was complete, two of her boilers, the main electrical switchboard, starboard turbines, auxiliary radio generator and emergency diesel generator were destroyed. The auxiliary engine room was flooded and three of the lifeboats were wrecked. Worse than the damage, twenty men were dead and sixteen more were badly injured, six of whom later died of their wounds.

The survivors took to the remaining lifeboats and were picked up by several trawlers. Two other destroyers, USS Stack DD-406 and USS Sterett DD-407 made a sweep for the U-boat, they made two depth charge attacks, but made no observations of damage. However, U-132 was damaged enough that she had to return to LaPallice, France for repairs.

Before 1500 hrs. USS Gwin DD-433 came alongside and removed the remaining crew, including Cdr. Hall and the British tug Restive moved in to take the Hamilton in tow. Heavy seas prevented the tow and any thoughts of reboarding the ship and she drifted alone until the next morning when Frisky got a line on her. She towed the crippled cutter about 18 miles, but at 1728 on January 30, 1942 the Hamilton turned turtle. By this time USS Ericsson DD-440 and several other ships had arrived on the scene and it was decided that Ericsson would scuttle the wreck. Twenty-two shots were fired at the overturned ship, but only three hit her, this caused her to sink, but she came back up. This happened several times until until it was dark and the decision was made to finish the job after daylight. When they came back Hamilton had gone, there was nothing left but an oil slick.

Ernst Vogelsang was the only commander U-132 ever had, he made two more patrols in that boat, he and the boat failed to return from the second. The exact cause of the loss in unknown, but it is thought she may have been destroyed by the explosion of an ammunition ship, which may have been his last target.