We were finally able to get my FIL alone and ask about their financial situation. It's a mess. They get $2700. A month from Social security, have nothing in savings, are three months behind on the mortgage, and have filed bankruptcy.they want to sell the house but will only have $20,000 in equity . Would it be better for them to stay put since they filed bankruptcy? He thinks the process of foreclosure is prevented. They live in so they can't get a anything - not even a rental . They are in their 80's ,she has dementia.

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Sorrynotsorry, it's time for your in-laws to pack up and leave the house. No matter what happens, they really can no longer afford to live in the house. If they are months behind in the mortgage, how would they afford to fix something major in the house, like the furnace needs replacing, or there is a major plumbing problem.

Why can't they get a senior housing rental? Or are there waiting list? Maybe it is time to look elsewhere where the cost of living is more reasonable.
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They need a credit counselor through their county office of the aging. They may even need a conservator from this point forward. Call social services on their behalf.
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As I recall, there were folks who were using bankruptcy filings during the collapse of the real estate market in an attempt to forestall foreclosure. As I also recall, the bankruptcy statute was revised, but I don't recall the types of revisions. It's been quite a few years since I was familiar with that legislation.

I raise this issue because it might have been that bankruptcy filing to avoid foreclosure may not be possible any longer. I know that creditors wanted to close loopholes.

There are other options though. With $2700 monthly from SS, that should be enough to make payments on a mortgage unless it's well beyond their means. Do you know how their SS was being spent?

Personally, I would contact the lender to see what can be worked out. Depending on California statutes, there may still be time for a workout arrangement. I'm assuming the lender has already declared default and sent a demand and acceleration letter.

If your parents were able to sell ASAP, the $20K (+/- depending on sale price, closing costs, etc.) could be used to apply against the mortgage, but I'm sure there would still be a workout agreement required. If the bank is BofA, expect no cooperation; they're difficult to deal with.

The other big issue is whether CA provides for foreclosures in equity (by lawsuit) or by advertisement, which makes a difference in the procedures as well as the time frame.

Either way, there is still some leeway before an actual Sheriff's Sale takes place. At that point, the redemption period comes into play and the house can only be redeemed if the entire price for which the house sold at auction is paid in full.

Personally, I would try to work out an arrangement with the lender to forestall foreclosure, especially since they apparently have no funds to live anywhere else.

You really do need to contact the attorney who filed bankruptcy for them though and ask about the issue of whether or not it blocks the foreclosure. I'd do that ASAP. I did some quick research and learned that some bankruptcy courts actually have programs that allow cooperation with a lender in an attempt to reach an arrangement that doesn't cause the borrowers to lose the property.

You should also inquire as to whether California allows for deficiency judgments against the borrowers.

In addition, ask if the California Homeowner Bill of Rights still is in effect, been amended, or rescinded. This provides some relief for homeowners. Since the filters here will delete dot com URLs, I'm P'M'ing a URL on this issue to you for review. It might be helpful.
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