Would Larry staying and working for his dad have even helped?
Assuming Larry even told the truth in the first place (although he probably did, he was clearly scared in that last scene), it was still risky. I'm not sticking up for him, he was clearly impulsive, irresponsible, and selfish, but in a weird way he might've been safer running from the bookies.
Frank's offer of having Larry work for him while he paid them $1000 a month until the $26k was paid off, was the most responsibly sound idea, but who's to say it would've worked? I doubt they'd accept the installment payments anyway.
Was Frank planning to find them and give them the money himself? (These guys weren't some respectable businessmen, they were dangerous criminals who probably wouldn't think twice about murder. I wouldn't put it past them to hurt or kill Frank and his wife, or Cool, in order to get their money back or just to be taken seriously.) Was he going to give the money to Larry to trust HE would pay them? Knowing him, he'd probably gamble it all again, lol.
By taking off to Chile, at least it was only himself that was in any real danger (and he'd be harder to find anyway).