Is it permissible for a friend to back out of an agreement made in front of witnesses to demand a larger sum than what was agreed upon, exploiting the debtor's difficult circumstances?

The picture agreed upon between you and your friend is unclear. The proposed scenarios, such as writing the car's ownership to him, are not valid because the car was acquired with a loan from another person. Writing it in the name of someone who does not own it deprives the lender of the possibility of recovering his right. Writing it in his name makes it akin to a gift to him, and a gift to a lender is impermissible. Furthermore, your mutual agreement to separate with you paying him 4000 dinars for the installments and the car is also unclear.