Really, the worst? I don't think it's really unsalvageable at all. That size mortgage for the northeast is not bad.
The regular expenses listed in the OP come to $9,526.
$4,953 in mortgage and other household regular expenses
$4,573 in car loans, student loans, personal loans
The regular income listed was $9,200. This is a shortfall of $326/month. She will have to cut more than that, obviously, to start building up savings, but an aggressive debt paydown plan can be the kick in the pants that they need to get there, too. The total non-mortgage-debt is $169,434. On their income, it is definitely possible to get ahead of this, especially if they are willing to do what they can to increase their income, which they seem to be willing to do.
How is this the worst ever? Yes, there's work to do, but in the update, she's already listed ways that she is going about reducing many of the regular expenses, from cell phones and cable to daycare, and she is also considering selling the house. Personally, I'd look into selling the more expensive car, too. I am actually impressed by the quick response and adjustments she is willing to make.
Admittedly, I only read the OP, not any of the responses or follow ups other than the update listed in the OP itself.