1- Talk to the Bank
2-If that does not somehow resolve it, Talk to a GOOD Bankruptcy / Estate attorney
If he truly has no assets / way to pay other than retirement income then a chapter 7 bankruptcy will likely solve the issue. I am personally against Bankruptcy but sometimes it is all you can do. It would eliminate any possibility of a judgement attaching to his income needed to pay monthly living expenses, and, as someone said the credit ding won't matter.
Resolving with the lender somehow will likely be less expensive if they are convinced they are going to take a hit one way or the other. Offer them the fee you would pay an attorney and bankruptcy court in cash to settle the debt. Some will deal, some will not.
