Both could be correct, it just depends on what you mean. "Is your family in Bolivia?" Would just be asking if someone's family is currently in Bolivia. Example: Robin: "Where are you from?" Ulrich: "Bolivia." Robin: "Really? Is your family in Bolivia right now?" Ulrich: "Yes." "Is your family's in Bolivia?" Would be asking if something of your family's is in Bolivia. Example: Jeremiah: "Where is your family's house?" Kyo: "Japan, yours?" Jeremiah: "My family's is in Bolivia."

Is your family in Bolivia?.......RIGHT Is your family's in Bolivia?....WRONG

Both of these sentences have two different meanings. "Is your family in Bolivia?" - It means when someone asks you where is your family. "Is your family's mansion/home in Bolivia?" - The word "family's" is the possessive form. So it is a question indicates where the properties of your family are.

first sentence is right,second is wrong. family's isn't a noun.

I personally think the second sentence is incomplete. Since family's shows possessiveness, it needs to be followed by something which the family possesses. (¿Dónde está tu familia?) ¿Está su familia en Bolivia? Is your family in Bolivia ? ¿Está el pueblo natal de su familia en bolivia ? Is your family's hometown in bolivia ? What Ryan said also makes a lot of sense. You family could be living in Bolivia.