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Was the loan on the atv paid off with the money you got from selling it to him?
Ok. If you didn't pay off the lender, it still has a lien against the atv and has a right to recover it, sell it and sue you for the difference owed.
While you're not liable to your friend for him selling the atv for less than what he paid you, you would owe him all of his money back if the atv is taken from him or the subsequent buyer.
It will be like a domino effect - the current owner will have the atv taken by the creditor, that owner will sue your friend for his money back, and then your friend would have a right to sue you for a return of his money.
Because you've filed bankruptcy, your obligation to repay your friend may be wiped clear unless he can prove that you defrauded him (judgments for fraud aren't dischargeable). However, if he knew about the lien or even made payments to the lender, you should be off the hook for a fraud claim.
He has no claim against you for selling the atv for less than what he paid you for it, and if you disclosed the debt/loan to him and he bought it anyway, I think you're in the clear.
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