Did you get a TITLE to the "stolen" car? If not, the you sorta assumed the risks. Was it actually stolen at the time of sale or just not removed from the list after being recovered?
If the creditor does not list the vehicle as a stolen vehicle, then during routine checks against your friends social security or drivers license number brings up their new location. they can take possession of it wherever they find it at. If they do list it as a stolen vehicle, then if the local authorities run the tag or VIN number, it will come up stolen and then there's a whole new mess to deal with.
You should realize they are the legal owner. There must have been a reason you could not register the vehicle in your own name. You voluntarily listed the vehicle as having another owner and they turned out to be untrustworthy. All you can do is sue them, tell your story to a judge and try to recoup the money you paid for the vehicle. You will need proof of payment and your success will depend upon your evidence and the judge's decision. Lawsuits of this type are extremely common.
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