Should she walk away from her mortgage or file bankruptcy?

Bankruptcy would likely be the best route to go so that they don't sue her and make her come into court for numerous hearings. Social security is exempt from seizure by creditors, in or out of bankruptcy but without bankruptcy protection, the bank can force foreclosure and depending on where she lives, the bank may be able sue to her for deficiency on the mortgage after it is foreclosed.

If she wants to give up the house it is not necessary to file bankruptcy. Unless there is a re-financed loan a foreclosure will relieve her of what is owed. However, there could be complications depending on further facts. Consult an attorney regarding details.

Walking away from a home is the worst choice in the eye of the credit reporting agencies and lending institutions. If she wants to walk away from the home she should try to negotiate a short sale first. If the short sale is unsuccessful she should surrender the property through bankruptcy. This is important because if she refinanced the home and the home sells at auction for less than the refinanced amount your relative will be faced with a tax liability for the forgiveness of debt. If she surrenders the home through bankruptcy she can claim the IRS Form 982 exemption and avoid any tax liability.

If the relative's only source of income is SSI and she is giving up her home then there is no need for her to file for bankruptcy. SSI benefits cannot be garnished so even if a creditor obtained a judgment against her they could not garnish her SSI.