Your friend, as most have already said, def needs to speak to CAB and get advice as a matter of urgency. Don't go to a debt company - they charge huge amounts of fees. And def do not be tempted to sell the property to a 'sell and rent back' company. These companies often offer instant money - but also often at amounts well under the value of the house. The seller gets to rent the house back at a reasonable rent - which then increases to untenable levels until you end up out of your home and with no money in your pocket.
I would also suggest your friend gets some benefits advice asap - is she not getting some help with the mortgage from DWP?
The fact that she has lodgers may potentially impact on her benefits - she needs to make sure where she stands on this.
In your friend's shoes I would not hesitate in selling the house. If it's repossessed she will have no home and will still have the debt til the house is sold - and if she sells the house herself, she is likely to achieve a better result. As hard as it is, you also sometimes have to consider moving to another area. I moved from Poole (ooh, expensive) to Lincs where I could not only pay the bills but afford to eat as well. Bonus.
IVAs/bankruptcy - she needs advice on all these - they can have a knock on effect for getting credit/mortgages etc in the future.
If she sells and pays off her debts then rents, she might get help with the rent from the local council (Housing benefit) - but this is an income related benefit and if she has capital over £16k she will get no help (not that she'd need it if she had that much in the bank!
The CAB have debt and benefit experts who will help and will also act as a go between between your friend and DWP/creditors.
Jobwise - if she's been unemployed 4 years then this in itself presents a barrier to employment - she may well have to reduce here sights. I had a friend who trained as a teacher - even after 10 years unemployment she was still saying she would only take a teaching job and wasn't going to take a lesser role.
In certain circumstances, if you have a low paid job, you can get help in the form of Tax Credits. She could try exploring the various benefits/tax credits websites for further information.
Finally, if your friend is on income-related benefits (ie 'means-tested') then she needs to ensure that she tells the DWP everything that happens. ALL income and capital has to be declared - as I said, income from lodgers may affect her benefit and she could possibly be asked about where she sourced funds to pay off large debts.
Not trying to be the voice of doom here
- just the voice of experience.
I wish her lots of luck - and tell her that this will all be over one day and life will look a whole lot better from the other side.
1993 Cannondale Killer V - ancient & battered like its rider.
A newish Dawes road bike called Jim and a 2004 Claud Butler Cape Wrath.