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Instead of shipping FIL out to a Secrion 8 apartment, call your local Department of Health and Human Services and get yourself one. Find an attorney (legal aid) and file for divorce. Don’t blame your kids for having to stay together. This situation is toxic for them too.
I'm going to say pack up the kids and go to a nice relative who will take you in. If your family of origin was abusive (why you married this guy) then do you have a nice older aunt, or a grandmother who can help you out until you get child support?
I would call 911, tell them he is threatening suicide and driving around impaired and with him threatening to kill himself you fear he may use his vehicle to accomplish this.
Then refuse to allow him back in the house.
Does your husband not care about his children? Because from where I am standing any dad that thought this was an okay role model for children frankly doesn't care about their future.
He has to know that his dad is a manipulator and may be afraid he will actually kill himself, I personally think if you use that for control you're breathing air that someone else needs, shut up and get er done already.
Do not start giving him money. It won't stop.
I'm not discounting your issues with FIL. Does your husband feel obligated to house and financially support his father? Does he get that you dont want FIL to live with you?