Aso Mohammed Ibrahim, 31, was due to be deported after he was taken into the custody of the UK Borders Agency last October.
But the Iraqi Kurd claims it is too dangerous to return to his homeland and won a court appeal against being detained ahead of a final ruling on whether he can stay in Britain.
Amy Houston, of Darwen, was trapped beneath the wheels of Ibrahim's vehicle in November 2003 and died later in hospital.
Ibrahim, who ran off from the accident scene, was jailed for four months by Blackburn magistrates for driving while disqualified and failing to stop after an accident.
Amy's family have campaigned for his deportation since her death but Ibrahim has fought a lengthy appeals process to stay.
A UK Border Agency spokesman said: "We are extremely disappointed at the court's decision -- the UK Border Agency vigorously opposed bail for this man.
"Individuals with no right to remain in the UK will sometimes attempt to frustrate the removals process, but the public can rest assured that we will continue to work towards their removal as quickly as possible, presenting our position strongly at any appeals to ensure the appropriate outcome." continues here