I am living at my sister's home whose in-laws also live with her. Is it allowed for me not to interact with them due to their bad behavior towards me?
Bismillah,
Asalamu Alaykom,
If you not interacting with them or limiting interaction with them can prevent further animosity and problems, then it may be necessary to take such steps. It may also be advisable to keep a distance away from such people if they are being unjust and rude towards yourself. Of course one should try keep good manners and not stoop to the level of those who are being rude. But it still isn’t obligatory upon you to have a relationship with them.
May Allah grant you success