What is the name of your state (only U.S. law)? NJ

Back in September 2006; my Dad (73 years old when he had the accident) got into a car accident. He broke his hip; he went through 2 months of rehab; went back home and within 2 weeks; he fell down his steps and broke his hip for the 2nd time. He had surgery and 2 more months of rehab. His doctor did not want him to return to his home; because it had lots of steps. He told us to have him move in with us or place him in assisted living. He moved into my 1 bedroom apartment along; where my wife & I lived. We sold his house and used the money as a down payment on a ranch style house. We went through a elder care lawyer and my Dad was placed as a life estate on the deed of our new house. We closed on April 30, 2007. 1 year 4 month later; my Dad's Dementia got pretty bad and he can no longer live at home. We placed him in a nursing home. I contacted our elder care lawyer for help with Medicaid; but they want $5000 for their service. I went down to Medicaid last week and filled out the paperwork. I have not heard anything yet.

Our eldercare lawyer mentioned that if the purchase amount of the life estate is greater than the computed value of the life estate's interest, the difference is considered a transfer for less than fair market value that may be subject to penalty. We are over by $60,000; in which we dont have. What can I do to save our house? This is the only place that we have to live.

I know that my Dad had to live with us for 1 year for the life estate; in which he has.

I did get a letter from his primary doctor; stating that if it wasn't for my wife and myself caring for him; he would of been placed in a nursing home back in February 2007.

Second Question: (This was stupid by me) We had a joint checking account. His social security and pension went in there; along with my direct deposited pay checks. We used his money for bills, his medicine, food, etc. What happens?

Third Question: Before September 2006; my Dad supported his daughter and his 2 grandchildren. His daughter is NOT disabled; but never work and lived off my Dad. He paid for everything; including a expensive divorce / child custody lawyer. He spent over $35,000 in the past couple of years before his accident on this. My sister is now living on welfare and the dad has custody of the kids.

Fourth Question: My dad owes about $4000 in credit card bills. He has about that in saving; including his September's pension and social security. Should I pay off his credit card balances and go through his savings?

I do have a Mortgage on our house. The mortgage; is in my name only. I recently refinanced my mortgage to get a little lower interest rate and mainly to consolidate credit cards and car payment into 1 monthly payment. We won't have a problem paying for the mortgage; without my Dad's income.

Thanks for taking time and reading my story and for the help.
Joseph