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I agree with you. Unless you have signed anything personally, this is your mother's debt. An attorney does not contract with personal liability. If your sister has control of the finances and there is money available your sister should be dealing with this. If there are no funds, tell the council that the house is being sold and they should be prepared to wait for the funds. It is extremely unreasonable of them to take this stance and you might want to see a councillor to express your concern at the attitude being taken by their officials. I hope that helps. Please leave a positive rating so that I am credited for my time.
What do they mean by "using funds for their own personal use?" Can you explain what has happened in that connection?
When do you think the house will be sold?
They can't sue you. They would have to sue your mother. In any event the house could be sold by the time they take this to court.