Based on the information that you provided they would not be able to protect all of the equity in their home if they qualified for a Chapter 7 bankruptcy. If they are filing in California, more then likely they would use 704 bankruptcy exemptions to protect the equity in their home. The amount that they could protect would be $150K equity. If they have $500K in equity in a home the exemption would be insufficient to protect the equity in a Chapter 7 bankruptcy. A possibility is filing a Chapter 13 bankruptcy to protect the equity in the home. We would have to look if Chapter 13 bankruptcy is even feasible based on their current income and expenses. Here is the fulll 704 California bankruptcy exemption code: http://www,socaladvocates.com/california-bankruptcy-exemptions-704

I would suggest they look into other options such as a reverse mortgage or home equity loan. With the amount of home equity versus the amount of debt a Bankruptcy doesn't seem to make sense to me. Plus as the previous answer sets out your parents would not be able to protect a major portion of their home equity.

Bankruptcy would not be an option. Even a Chapter 13 would be too costly because of the attorney's fee and trustee's fee. Reverse mortgage just to pay $20,000 in debts would also be too costly. Maybe they need a reverse mortgage to live better their remaining years but that would not make sense for just $20,000. Best choice to pay off the high interest credit card debt and the car would be a home equity line of credit because it does not cost much to get and the interest rates now are very low. With the amount of equity they have getting $20,000 equity line of credit should be no problem.