Property Damage – What if I owe more on my car than its “total loss” value?
In previous entries we discussed the different options that personal injury victims in Kentucky have when dealing with the property damage that was caused by the accident and what it means when the damage is so bad that it is considered a “total loss.” A “total loss” is when the cost to fix the property damage to your car is more than the car is actually worth. However, what do you do when you still owe more on the vehicle than the amount of money you will get for the total loss of the car?
Here is the situation: you have already decided which company you will use to pay for your property damage (yours or the other driver’s), you have had the estimate done, you have agreed on the value of the total loss, and the insurance company has already sent you a check. There is only one problem: you still owe more money on your car loan that the amount you got from the insurance company! This situation is commonly referred to as being “upside down” on your car payment and it happens to a lot of people. Being upside down on your car loan is even more likely when you purchased a used vehicle from a so-called “bargain” dealer who specializes in selling to people with no or little credit rating. Because you have no or little credit, these dealers will still give you a car loan, but with a steep price. Often they will charge incredibly high interest rates or tack on other fees and charges for late or missed payments. The result is you are paying a lot more for the car than it is actually worth. That means that when you get that total loss check from the insurance company, there is not enough money to pay back the car dealer.
Do not panic! You are not the first person to be stuck in this situation. The first thing you can try to do, if you even sense that you may find yourself in this situation (and before the check is written to you) is to put the dealer and the insurance company in touch with each other. Let them work out the whole thing. Often, in exchange for a lump sum payment on the car (ie. the check from the insurance company) the dealer will simply accept the money and write off the debt. If you did not anticipate this and you already have the check, you can try to make this negotiation yourself. Often you can even use the check to put a new down payment on another vehicle from the same dealer. They want your business! It is better for them to keep you as a customer, get paid something for the car that you did owe on, and sign you up on a new loan, than to lose your business and not get paid anything. You have more power than you think!
For more information on your options regarding property damage, please contact the experienced attorneys at Bahe Cook Cantley & Jones PLC. While we do not typically handle these types of claims, we realize that this is part of the accident process and are happy to try and answer your questions.
