The lien was placed because your wife has a judgment against her. A creditor cannot place a lien on personal property without first obtaining a judgment. As for filing bankruptcy, that likely will not be the best option for you at this point. The house the lien is placed on is not likely your homestead and therefore could not be protected. Meaning the trustee could seek to auction the house.
Your wife's sister should not have put all the children on the deed without first consulting an attorney about the potential ramifications. Your best option here might be to settle the debt with the creditor, this would remove the lien from the home.
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I agree with my colleague's answer. You could try calling the credit card company to see if they will work out a settlement with you. If you pay a reduced amount, they might release the lien. If you are doing this, make sure to get them to record the satisfaction at the court house. Your wife might need to file bankruptcy for other reasons if she has other debts. Many attorneys in your area offer free bankruptcy consultations.
It is ALWAYS a mistake to put an elderly person's assets in the name of others. If it was done to obtain Medicaid benefits, there is a 5-year look-back period so mother is not eligible for Medicaid until AT LEAST 5 years have elapsed since her house was deeded away. If it was done to avoid probate when the elderly person dies, capital gains taxes are likely to be much, much higher than any little amount that was "saved" by not going through probate. There are too many reasons to name here, but you have just given us yet another reason. I strongly suggest you & mother take this mess to an elder law attorney before making it worse. Good luck.
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