Thank you for the additional information. The homestead exemption in Alaska is $54,000. Bankruptcy may work in your situation because all of the equity in your house can be exempted, which means creditors cannot get at it. This is because you have less than $54,000 in equity. If you were to file bankruptcy, then you could wipe out that, plus any additional unsecured debts that you may have such as credit cards, medical bills, et cetera. Obviously bankruptcy is not ideal, and it is generally considered a last solution. On the other hand, it may do exactly what you wanted to do, which is eliminate the debt and allow you to keep your assets. If you do nothing, and stop paying, then the creditor can eventually sue you and get a judgment against you. With the judgment, the creditor can put a lien on your house, and garnish your wages. So, if your three options are to pay, to stop paying, or to file for bankruptcy, then bankruptcy seems like the best choice. If you would like to go that route, then you should retain a local bankruptcy attorney to assess your case. It will likely cost you around $1500 total for an attorney to file the bankruptcy.
Unfortunately, your in-laws may be in a worse situation. This is because they own their house outright. If the house is worth more than $54,000, then the creditor can go after that equity. Unfortunately, it would not be possible for your in-laws to give the house away, for example to you, in order to protect it. That is considered a fraudulent transfer of assets. If their house is worth less than $54,000, then they too could file for bankruptcy. Assuming, the house is worth more than $54,000, and your in-laws cannot continue to pay the debt, then they may wish to retain a local attorney who can try to work out a settlement with the creditor. For example, it may be possible to grant the creditor a lien on the house, with the understanding that will be paid when your in-laws pass away and the house is sold. That is just an example, but the point is that an attorney may be able to work out a creative solution that allows your in-laws to stop paying and still keep their house at least while they are alive. Obviously that is less than ideal in the sense that they would prefer to simply eliminate the debt. However, the facts may not allow it in this case depending on the value of their house.
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