I have some questions, because we were confused by it

You say that your dmil totaled her car by hitting your sil’s house, that the windshield popped out, and the air bags deployed. So how the heck did it end up at the school? Whose bright idea was it to move it?
Also, why is your dmil getting a car with a loan on it? If she gets a $2,000 settlement, then she gets a $2,000 beater. I know that’s not what she wants, but want and need are two separate things. When my dmil STUPIDLY let my niece drive her car without insurance and my niece totaled it dmil didn’t get a new car out of it. In fact she didn’t get a car at all from the niece or my sil. Dmil was only carrying liability insurance so if dmil’s bil hadn’t given her a beater that he bought for her—a real tank—she would have been totally without wheels.
Dmil threw a hissy fit about having to drive the tank and demanded that dh and I help her get a brand new car, but we refused. We set boundaries. We refused to enable. If you do not protest her buying a new car and point out how irresponsible she will be in getting a car with a lien on it you are enabling her and your other family members to continue their use of you.
I’m not saying be mean to her, I’m saying set boundaries. Why should you pay for her , I believe you called it a stupid mistake. She is an adult and as an adult needs to be responsible for her own actions. Lovingly point out to her that IF she will drive a beater she could be on her own enjoying a successful life that much sooner.
As for your sil, yep you need to explain to her that your mil is NOT her personal slave and that sil had her kids and they are HER responsibility.
I know all of this is tough and you don’t really need this stress while you are in what should be the happiest time of your life, but your first loyalty is to your husband and child. I know all of this is hard, been there, done that and learned from it.

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