Hi E.,
You just might be the only sounding board this "friend" has left. Yes, I would certainly taper my time I spend with her, but leave the door open. Never shut it completely. I've used this philosophy throughout life and I'm so glad I did.
In today's culture, I've heard a lot of people say things like, "I'm done with you!" or "as far as I'm concerned you are out of my life".
These are searing statements meant to sever relationships, but certainly not very mature, or Christlike in any way. As far as friends go, the Bible tells us "a friend loveth at all times" Prov. 17:17. That's true friendship.
Obviously, your friendship has lasted many years, or you wouldn't care at all about her. So, it does mean something to you.
As hard as it is to do, you do need to tactfully be honest with her on issues you disagree with strongly. Don't allow her to think you agree with all she does. There is a verse I love that is very profound, "speaking the truth, in love..." in Eph 4:15. We should stand up for truth, but it is very important that we remember that second part, "in love".
As some have said, and as you have said yourself, it sounds like there is a major crisis going on in her life right now. Her financial world is crumbling all around her. That's rough for anyone to go through. This same thing has happened to us, and too many of our close friends in this depressed economy we're in right now. Yes, they've made wrong financial choices, most of us have at one time or another. She'll see that too, if not now, but one day.
By all means advise them to get some good debt couseling. InCharge Debt Soulutions is free & very helpful.
The bottom line is, she needs a friend, or friends who will be there as she goes through this, encouraging, offering hope, prayers, advice, and most of all, a listening ear.
Should you offer any financial help or other lifeline? Absolutely not, she needs to do that herself. It's all part of her growing process.
I hope this helps...