If the bank forecloses on your friend, in most cases it will take possession of the home but nothing else, explains Carol Freidhof, a certified financial planner and founder of Savvy Outcomes in Dublin, Ohio. Some states allow what's called a deficiency judgment in which the lender can bring a judgment against the homeowner if the foreclosure sale does not raise enough to pay the mortgage balance. Regardless of the laws in your friend's state, retirement accounts and Social Security are protected; lenders cannot demand those funds in a foreclosure situation.

Does your friend have any equity built up in her home? If so, she may want to consider a reverse mortgage. Although fees can be high, this would produce a steady income stream and help avoid foreclosure.

— Walecia Konrad