Bank won't accept a settlement

[ecartea]

My Husband and I purchased a Jeep in April of 2006. It was put in my father in laws name due to our lack of good credit. The base price was about 18,000. We put 500 down and start making payment in June of 368 a month. In late September our insurance was canceled and we had parked the vehicle in our yard. Still making payment all the while. In late November it was stolen and wrecked beyond repair. The gap insurance covered only 3000 which brought what we owed down to 15000. Between the down payment of 500 and the monthly payment we've paid 8228, 5520 after it was totaled. We had tried to settle once before and they refused saying they would accept the total owed on the vehicle. We've been paying on this vehicle ever since and don't even have it in our possession. First question is can we refuse payment legally until they agree to settle. Second question is what would be a reasonable offer to settle, I have been told that in my situation anywhere from 25 to 50 percent of the total owed. Third question is there any other option we have to get this settled.