I'm sorry to hear you are in this situation. Every time I have involved friends and finances I have regretted it. Literally thousands of dollars fucked. I now just assume it's a loss now. I agree that they are probably making a financial decision to let the car go and making you deal with it. I would take that into consideration if you ever deal with this person again. I wouldn't give two fucks about her kids. If they were really hungry they could go to California state welfare and make more money than all of us.
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2007 C6 z51 416ci, KW variant III, Wilwood WS6, Traqmate.
2005 F-350 PSD 4x4 DRW Lariat
2013 Mustang GT Grabber Blue, track pack, Brembo, Recaro, 3.73s
2009 Jetta Auto 2.5 liter
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