this totally unfair but true

say you had bought a car in good faith ( like this situation) and it had outstanding finace on it by the previous owner, the finance company can legally take the car from you to recover the debt tottaly unfair but totally legal its the innocent person that loses his money and the car, same if its stolen and the prevois owner has been payed out by insurance it then becomes the insurance company property like in this case

talk to solicitors as its in your best interest but dont expect it to be settled quickly it will take months / years to come to a conclusion