The most reasonable resolution would be for you to pay your ex- the money you owe her. Sorry, I don't find your rationalizations of why you pocketed the money or why you aren't convinced it was intended for her medical care to be convincing.
The claim should be by your wife, not her father. You didn't owe her father any duty nor did he loan or give you any money. You can leave her to deal with her own credit issues.

