Not a lawyer, but I had a similar experience. Dealer stopped being an FFL due to family health issues. Dealer had received my suppressor after their FFL expired so they couldn't transfer it. I called my local BATFE office and they confirmed possession of the NFA item by the expired FFL (via warrant) and then they expedited a paper Form 4, which I had to completely fill out, since no one else knew how, as though it was an in-state person-to-person sale. I paid the $200 stamp with the form 4 and within a month I had the local sheriff offices' ATF division contact me to pick up the firearm that they held in evidence. The bonus for the wait was I didn't have to pay the transfer fee :). No one got in trouble and the problem was solved rather quickly as everyone cooperated with authorities. Fun fact, the deputy gave me the suppressor and I was like, where is the paperwork (i.e. the Form 4). He forgot it and said Let me go get it (different location 10 mins away). I said here, take this back. He said, no, I'll be right back. I had to explain that I would be in violation of NFA laws if I was in possession of an NFA firearm and didn't have the paperwork. He admitted he didn't understand all the laws - even joked about how technical they were....and he was an ATF agent. Just shows how complicated the laws are and how little people know about the NFA.
In your case, the co-signer may have to sign the form. Regardless, call your local ATF field office immediately and set up an appointment to discuss. As much as we complain about them, they really do help. Ironically, they knew nothing of the NFA process, so I had to fill out the form and put one of those "Sign here" stickies so the agent could have the right person sign.
The first thing I did, though, was I called the FFL that sent the item to the dealer and asked for the Form-3. They gladly sent me a copy. That shows you own the NFA item, but just can't possess it yet. Everyone's case is different, but I would start at your local field office. If your FFL was the selling FFL, I would recommend having the receipt which should have the Serial and model on it.
Good luck. And sorry for the loss of your friend.