I see you may be login for a foolproof strategy for protecting your parent's assets against a deficiency judgment from the foreclosure.
My disclaimer is that there is no foolproof plan.
let me explain:
Attempts to transfer assets to hide them from creditors is considered fraud. Now, most people are reluctant to claim Fraud. To avoid this, the courts allow for a look back period. This look back allows a creditor to make the charge that there was an attempt to hide assets. This is determined by the timing of events.
lets take each of the options you have to protect the assets in turn.
1. You mentioned a lien solution: In order to file the UCC-1 form and to have your lien in first place, you have to have a lien. Now if no debt relationship exists, you would have to create one. However, in this instance you are a family member, and it is apparent that no debtor relationship exists. To create one where one does not exist, to enable you to file a lien, would be considered tantamount to fraud. You could conceivably legally actually loan your parents money equivalent to the assets you seek to protect, and they can in the contract pledge these assets as collateral. This would allow you to file the lien you seek, and to subsequently file the UCC-1. But if this is happening within a few weeks or months up to a year, of the planned foreclosure, it could be viewed as fraud. I do not see this as an option. It would be better for you to simply lend them the money to bring house payments current or sufficient capital to recap the loan. If you were to legally be able to file a lien and then use UCC-1 to secure first position, you would have to foreclose on your lien (known as perfecting the lien), in order to take ownership of their liquidated assets. (presumably to later give it back to them; but I would put the assets in a special needs trust with them as beneficiaries). Again, this type of arrangement which does not already exist would have the highest likely hood of being perceived as fraud and challenged by the foreclosing bank.
2. The trust: With this plan, it can happen two ways. The parents could put the non-secured assets into a trust for other persons benefits. However once again, if it is done within 6 months of a foreclosure. It is possible to be challenged by the bank and treated as an attempt to hide assets, and there for fraudulent.
The second way, which I favor is, that your parents transfer their assets to you. This means the ownership of current and future assets is transfered to you and then you place them in a special needs trust for the benefit of your parents. Even if done in close proximity of the foreclosure, it is harder to prove that the is was done with purposeful intent to hide assets. An element of risk for looking back is still present, but no so evident.
3. The third way to protect assets is for the parents to simply transfer ownership of the assets. NO trust is involved. There is still a risk of look back.
ALSO NOTE: any transfer of ownership of the assets in excess of 12,000 dollars is reportable to the IRS on a gift tax return. However, unless the value of the transfer exceeds 1 million dollars in a life time, then there is no gift tax assessed.
4. They can file bankruptcy under chapter 7 if they meet the means test: http://bankruptcy.lakelaw.com/meanstest.php
Yes...I am single