My mother in law is in her 80s and lives alone. She owns her home but hasn’t been able to maintain it for years, relying on her brother (also elderly) to take care of the yard work and all repairs. Recently, due to a heart condition, she has found herself even more unable to care for the home— not even able to stand and do the dishes or cook for herself. She desperately needs to move, however we don’t know what our options are with the house. She has borrowed against the value of the home several times and it is currently in a very decrepit state. The area that the home is in is no longer desirable and she now owes more on the home than what it’s worth or what we could realisticly sell it for. What happens now? Are we responsible to paying off the balance of the loan? Are their relief programs to help in situations like this? Any advice is appreciated.

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Igloo, no I don’t know if mother would have to appear. If someone else files, the order might be made in her absence. You can’t stave off bankruptcy by not turning up! Alternatively there is usually an option for a visit outside the office if necessary – here it wouldn’t be a full catastrophe judge hearing in a courtroom anyway. A phone call to the local appropriate office should provide all this information. It’s one of the things that OP needs to check out.
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You and your husband aren’t responsible for a loan unless you are co-borrowers or you guaranteed it. MIL probably couldn’t have taken on mortgage loans ‘several times’ (usually only up to third mortgage) but she might have increased the loan amount on an existing mortgage. Alternatively she might have taken out other loans. ‘Walk away’ mortgages were part of the problem in the GFC, but usually the borrower retains liability for the debt even if the house is reclaimed under the mortgage terms. It sounds as though the shortfall may be substantial. There is unlikely to be any financial ‘relief’ program to help.

In the circumstances, walking away may be the easiest practical option for you – and certainly for MIL. If she is likely to go into a facility, take out low-value items (particularly those that will make her feel at home there), but don't take high value items that will annoy the bank. Put in the Medicaid application, find the right facility for her and for her brother, and if necessary stall the walk until that is in place.

If there are remaining debts, either to the mortgagee/s or to other lenders, a practical way to deal with them is likely to be for her to file for bankruptcy. Loan advisors and debt counsellors may try to talk you out of this, offering consolidation and loan reductions. This can keep the problem going for years, and bankruptcy will probably be a better option. She needs her future income, not to have part of it go in repayments. Under bankruptcy MIL will keep many items – you can find the details if you search ‘bankruptcy’. She won’t be left with just the clothes on her back! Bankruptcy is not a shame in these circumstances, it’s a lifeline.

Good luck in a difficult situation!
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igloo572 Mar 2019
Margaret, any idea if the mom would need to actually personally appear for a BK hearing? I don’t know anyone whose done a 7.
I’d be somewhat concerned that the OPs mom cannot appear to be competent and cognitive to answer questions or affirm to debts or how she got to having those debts if the judge asks.

Now 11 & 13’s I’ve known folks / biz who have done BK and they do need to actually appear before a judge. Judge can grill on a certain asset. I had 2 clients who did BK after Katrina who owed me so I got the hearing notices. I could submit a concern to the court if I wanted to or go to the hearing.
Just what kind of borrowing is it?
You say she owns her home but has “borrowed” against it several times. So she has a HELOC? Or has Reverse Mortgage? or some type of storefront payday type of lender? What exactly the type of lending will make a difference as to what her options are as to how to deal with lenders.

And is all this lending totally in her name?
If so you are not responsible for payments. Or any other property costs. Neither is your elderly uncle.

If the house is close to being considered “underwater” for value and has issues with the majors on a home (roof & foundation), actually selling the property will be difficult. Sometimes for this situation, it may be best for them to flat walk away on the property and the debt. It gets foreclosure.

I’m guessing that both her & the elderly brother are on SS and each get under 2k SS paid to each of them per month. Neither has much in savings, like under 2k. If so they should be eligible for LTC Medicaid. Personally I’d use what $ they have and hire an elder law atty to shepherd their Medicaid LTC applications and also deal with letting house get foreclosued upon. It’s best not a DIY.
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Assuming she is also financially destitute and that's why she's flip flopped on the home mortgage, just moving her out and letting the bank do a repo is probably the best option. I don't think you have any legal obligation to pay her bills and will likely have your hands full just taking care of her. You should obviously consult an attorney for the legal how to advice. At her age and being destitute there's not much I can see that she has to lose by having bad credit. Actually I find that it's easier to avoid the scams if they have bad credit. The only glitch I can see would be if you have co-signed for loans or have taken the proceeds of a loan she took out and used it for your personal needs. I'm sure others will tell you to talk to a lawyer and that's good advice.
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