Can a self-settled trust be drafted when your house is going into foreclosure?

Yes, it can. When the bank forecloses on the house, they will re-sell it shortly after taking possession. If that results in a deficiency, they can obtain a deficiency judgment against your father. If the pension is being paid into the trust, your father no longer has control over the money. He will receive distributions of goods and services from the trustee that are intended to improve his quality of life. But. he will not receive any cash. After he passes, the state becomes the first payee on any amounts left in the trust up to the limit of the assets or the limit of the amount of services he has received through Medicaid. If there are assets left, they may be attachable by another creditor, such as a lender with a deficiency judgment. Have you considered short-selling the property? Banks will often waive the deficiency in a short-sale situation.

Yes it can. If your intention is to put the house into the trust, that is not likely going to affect an ongoing foreclosure. Nor will it protect the borrower from a deficiency, which is the difference between the amount owed and the value of the property at the foreclosure sale date. However, a deficiency may not be something to worry about if your dad is the borrower and living in a nursing home. If there is equity in the home, you may want to consider talking to an attorney to discuss your options. You should probably do this anyway if you are forming a trust.

Yes, but it would not protect the home from the foreclosure. In addition, it may make it easier to have the bank make claims against other assets in the trust. It might be a good idea to do a separate self settled trust for the home or just an enhanced life estate deed (depending on the amount of the mortgage) If the home will be foreclosed on and there is no equity, why do this?