Let’s be clear. Until she was 18, she was your responsibility. But she’s an adult now, with adult responsibilities. I’m concerned that she is using the threat of your grandchild being homeless as a way to leverage you into doing more than you can afford to do. It won’t help either of them (or you) for you to go bankrupt. With all good intentions you have taught her that you will always be there with the checkbook. But it won’t help her grow up if you continue bailing her out.
I suggest you talk to a local therapist about your options regarding your daughter and your grandchild. Explore whether it is possible for you to take custody of the boy while your daughter figures out her life. Explore what services are available for adult women, including mental health services, financial counseling, and shelters. There may be a program that would help her get on her feet. Emphasize that you love her and that you are always happy to see her and her son but that (1) you can’t/won’t provide any more funding and (2) you are unwilling to see a 5-year-old suffer the consequences of her poor decisions.
There’s no easy alternative here. Breaking a pattern of dependency isn’t easy. Taking on raising a child isn’t easy either. But neither is the current situation.
Sticking to a plan will be one of the hardest things you’ve ever done. But continuing the course you’ve been on isn’t any easier. You are probably going to need some support. That’s a legitimate use of therapy.
I wish you well,