Quoting melmel
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Also, should my mother-in-law be consulting with an attorney?
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Your
daughter should be consulting a criminal defense attorney. Her grandmother did nothing wrong so the police and the district attorney are going to be handling this for her, free of charge.
Your daughter is facing probation violation, felony fraud, identy theft, and a host of other charges. Serious jail time and fines are definitely in her future.
Hire her a criminal defense attorney, like last week! Even if the grandmother doesn't wish to pursue charges, the state will. Your daughter's in serious trouble here.