Bankruptcy and qualifying for mortgage

[mnea]

With the current state of the mortgage and credit industries...If a client's hopes are to qualify for a mortgage in near future, what's the best course of action to recommend if their situation is as follows?

Little or no income in 2004 & 2005
$70,000 in credit card debt
Money coming in from elderly parents in return for providing live-in care 2006 & 2007

1) Pay down debt as much as possible and claim as much of money coming in as possible as taxable income for 2006 & 2007 thus showing income but also increasing debt by amount owed to IRS.

2) File Ch. 7 bankruptcy to clear debt and wait out any negative affects on FICO score, consider up to maximum allowable of money coming in as tax free gift and claim remainder as taxable income.

3) Some other strategy...please be as specific as possible.

Thank you in advance for your input!