You can just walk away because it's not your house or your lawsuit. I am assuming the house is underwater and she had no assets anyone wanted to probate. Your husband's brother can stay there quite awhile. He cannot defend the suit, because the only one to defend it would be the Estate, and there is none. He can monitor the progress of the foreclosure. If he doesn't know how to do that, he may want to hire an attorney to monitor it monthly. That shouldn't cost much.
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You can walk away and the children are not liable.
The lawsuit should have been filed against the estate-so if you send the attorney that filed lawsuit a copy of the death certificate-the attorney will have to refile some papers which will take extra time.
The answer given does not imply that an attorney-client relationship has been established and your best course of action is to have legal representation in this matter.
You can disregard the summons, the law requires the foreclosing party to serve the summons in this manner. As long as no one other than your m-in-l signed on to this debt, it will not effect anyone else's credit. Often the only way a person occupying the premises knows that it is time to move out is when the sheriff's office comes by to service notice that the premises is being taken over and usually it is not a lot of time to get out. Your b-in-l could speak to a foreclosure attorney and find out what to look for so he has plenty of notice to remove his belongings. He can call The Florida Bar's referral service at 800/342-8011 and ask for a referral to a foreclosure attorney. I believe the attorneys in that referral network have all agreed to a 30 minute consultation for a very low rate of pay (he can confirm this when he calls). Then he can decide if he wants to have the attorney help him further or wants to try to track on his own.