First of all I would say 'Neither a borrower or a lender be.' but that would sound like my Dad and not be too realistic. I have been in a similar position except did not have the collateral!!!

If your friend has given you the go ahead to sell the gear and you don't need it then I would sell it. (Maybe first get it in writing or something that it is now yours though or some ugly legal stuff could come down the road.) Your relationship with your wife should be more important than friends or gear. This friend has lived without their gear for quite some time now so does not have any pressing needs for it.

Sorry that you have to go through this. Not a fun position to be in but you and yours come first.

Just my .02 worth