What do you do when a house isn't worth what is owed?

30-year refinance loan. A little over 10 years into the loan. The neighborhood has gone downhill considerably and we haven't had the finances to get to a better area. A little under 50K is remaining on the balance, not including interest. Original loan was about 60K. Payments are 500/month. 7 percent interest rate.

Owner (family member, not my loan) filed Chapter 7 bankruptcy last year, but it couldn't be included because it is a secured loan. They're working, but not skilled enough to make a lot of money. I don't mind helping them financially, but the house isn't worth putting money into unless it is an investor with workers and enough money to get it to where it needs to be.

House isn't properly insulated, pipes are old, wiring is old, lots of stuff not up to code, etc. A house up the street of similar size sold for like 32K. Someone bought the house across the street, remodeled it and sold it for about 130K. Property values around the area range from 40K to up to 100K and everywhere in between. Front and back yard combined are probably just under half of an acre. 1950's house. The repairs are upkeep simply aren't worth it anymore, even though the mortgage may sound "low" at 500/month.
Added (1). Basically my question is… How can I get them out of this old house? I gladly help with finances, will help them rent a newer home, etc. I'm just not wasting money on this old one.

Would it be possible to get a deed in lieu of foreclosure?

Are there any other options if they refuse that, apart from just walking out and leaving the house? The main concern is that just leaving the house in a neighborhood like this is asking for trouble.
Added (2). A house next door to us wasn't rented out for a while. Some homeless guy broke the back window and went in. Apparently he had a mattress and was living in the attic or something like that. Someone else stole the central air conditioning unit. Leaving it would basically invite someone to break in within a short time and destroy the inside. We don't have an alarm system.
Added (3). Redesigning/remodeling is not an option. They don't have the money to do all of that. We've done basic stuff like painting, etc.

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