Would this be considered insurance fraud?

Someone I know was in a car accident. They were hit from behind and pushed into 2 other cars. The person that hit her doesn’t have enough insurance to cover all of the damage. So the person I know sued the person that hit her to cover the damage of her car. Meanwhile, the person I know hasn’t made all her car payments and is letting her car go back to the finance company, damage and all. She is collecting money (a settlement of a few thousand dollars from the insurance company and from the person that hit her for the remaining few thousand.) If she lets the car go back and she keeps the money from the settlement, is that considered insurance fraud? What would the reprocussions be from it if it is??
It’s hard for her to do the right thing because all she sees is $$$$$$ dollar signs.

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