Do I Need To Split My Car Buyback Check With My Cosigner Who Owes Me Money?

Location: Portland, Oregon (and Central Pa)

I helped a friend lease a car by cosigning for it, and I provided a $4000 down-payment. Between that, employee discounts, and EV tax credits, he was able to secure no monthly payments! It seemed like a sweet lease for the first three months, until he lost his job and the car was recalled to the dealer and spent months sitting on the lot. I ended up helping him with $7000 total over 6 months, in apartment rent, charging costs, and the down payment. Eventually, he worked with Ford and had the vehicle bought back. He was expecting the check to go to him; he would pay me back "when he was financially stable."

The check came in the mail to me, made out to "me *or* he" so I could sign and deposit it. $10,000, because the refund included the EV tax credits. He insists that at least $4000 of the money is his, because I only paid for the down payment. Naturally, he lives in Oregon... and I live in Pennsylvania. But here's where it gets even more sticky:

I had previously helped him cosign a car. ????‍♂️ ten years earlier when he was living in PA instead of Oregon. He didn't tell me he had a criminal record (nothing serious), but he was arrested several times during this co-ownership for failing to adhere to his parole parameters... when the car was with him in Idaho, then Oregon, and Washington, and Oregon again. Long story short, i was trusting, i gave him multiple chances, and he cared for the car. The last time he was arrested, the car was impounded and sold. I paid for all but $400 of the car -- plenty of predatory "negative equity" included.

He had been quiet for a month when I just stopped responding to his texts asking for all of the check, then ¾ of the check, then ½, then $2000... and he texted me tonight, saying that "his people" would be in touch, and that if this went to court, it would cost me far more than the $4000 he wants.

My question: is he absolutely bluffing? Would someone who seems to have been so cash-strapped that he cannot afford $400/mo car payments as well as his rent have the resources to lawyer up for a crack at *maybe* $10,000? Would a judge overlook the messy past (we were never in a romantic, etc., relationship, btw) and focus specifically on this check scenario?

I want to just say "this check settles our debts, let's just part ways". But he insists that he deserves some of this money.

Do I call his bluff and keep the money until I get a court summons? Or do I settle this and give him money before it goes any further? Thank you!