Liars. Oh, how I hate liars. I would give the benefit to the doubt to anyone who tells the truth, even if it's an ugly truth.
I am so, so sorry this has happened to you. I applaud you for getting the council member involved. Persist!
As for only affording minimal insurance - yep, me too. As for not having a car - mine's been at the mechanic for over a week. I'm about to call him right now and ream him, I'm so pissed.