I was very surprised when you mentioned the credit card at that point in your story, wouldn't have expected her to have one in the first place, given her circumstances and the spending patterns you describe. But then, that's probably a question of differences in banking habits between countries (nobody in here ever uses checks for anything, and credit cards almost exclusively for online purchases and traveling abroad - everything else is by debit card, and hence also no issues with outdated account balance information).

Anyway, clearly the credit card has to be replaced by a debit card, but guess the damage is done by now... I would imagine that can be negotiated to some extent if you're clear that you will pay the negotiated amount promptly, but of course with the collection company already involved, seems unlikely they'd waive their fees entirely even if the bank would be amenable to that?

My mother, siblings and I were in a somewhat similar situation when my dad passed away a few years ago - he had been in a slow-moving dispute about a few bills that he said were incorrect and declined to pay, but we came in too late and didn't know enough about the details of the case to be able to argue it, and by then the claimants had passed the whole file on to a collection agency, so basically the only viable option was paying those vultures immediately before they added even more charges. Pretty infuriating, alright.

It's not very clear to me to which extent giving up the car is at all a viable option, whether she can still go to her usual places without it. But even if so, it's still a pretty radical step which she'd surely resent you for - but maybe necessary if she's actually a danger to herself and others on the road. I don't really see a connection between the credit card thing and her driving skills, but you did also mention she gets lost even in familiar places sometimes.