Generally speaking, when a person totals a financed vehicle without insurance to cover the damages, she will be left owing the balance of the loan, less any money the finance company can get by selling the car- the difference between what you owe and what the finance company obtains through the sale is called a deficiency balance.
While deficiency balances most often result from repossession, they can also result from uninsured accidents, such as you describe in your question. Since you presumably no longer have the vehicle, this debt can be considered like many other types of unsecured debt, such as credit cards and personal loans. Most states allow creditors to collect on deficiency balances like any other unsecured debt, which can involve collection calls, accounts being referred to collection agencies, and possible legal action being taken against you. There are several possible ways for you to resolve this deficiency balance, but the best course of action for you will depend on the amount of the debt, your income, your assets, and your other financial obligations. Thankfully, you had liability insurance on the vehicle so your insurance company should compensate the other party in the accident, leaving you with only the deficiency balance to resolve.
Once the finance company becomes aware that the vehicle is totaled and that you have no insurance to pay off the loan, you will likely begin receiving collection letters from the creditors (unless, of course, you continue to make payments each month on the auto that no longer exists).
It may take several weeks, or even months, for the creditor to sell the vehicle and determine the amount of the deficiency balance you owe. Once the creditor has determined how much money you owe, you will likely begin receiving collection letters and phone calls from the creditor; until the deficiency amount has been determined, there is little you can do to resolve this debt. However, I encourage you to contact the finance company to discuss the situation as soon as possible to find out what options, if any, the creditor can offer to assist you in resolving this loan once the deficiency amount is calculated. Hopefully, the finance company will allow you to establish a payment plan to resolve the outstanding debt.
If you find that the creditor is not willing to work with you to resolve this debt, there are a couple of alternative options you may want to consider. First, you may want to look into the services offered by debt settlement firms. Rather than making monthly payments to your creditors, these programs negotiate lump sum settlements with your creditors, frequently reducing your debts by 50% to 60% of your principal balances. These programs usually take 2-3 years to complete, so this is a good option for many people to rid themselves of debt in a relatively speedy manner. There is one major drawback to debt settlement programs, though- they will significantly damage your credit while in the program and for at least a year or two afterwards since you will not be making regular payments to your creditors. However, the hit to your credit may be worth the benefit of resolving the deficiency balance relatively quickly. If you would like to learn more about debt settlement programs, I encourage you to visit the Bills.com Debt Help page.
If you cannot resolve this debt through a payment arrangement or a debt resolution program, you may want to consider consulting with a bankruptcy attorney to determine if filing bankruptcy is a viable option to help you resolve this deficiency balance. There are basically two types of consumer bankruptcy- Chapter 7 and Chapter 13. To determine which type of bankruptcy would best suit your financial situation, you will need to consult with a qualified bankruptcy attorney licensed to practice law in your state. To find an attorney in your area who specializes in consumer bankruptcy law, you can contact your county or state Bar Association's attorney referral service. To learn more about bankruptcy, I also encourage you to visit the Bills.com Bankruptcy Information page.
The fact that your insurance company did not warn you that you only had liability coverage on your vehicle will probably not help your situation. Generally speaking, an insurance company has no obligation to warn you that your insurance coverage does not meet the insurance requirements of your auto finance agreement. It is your responsibility to verify that you have adequate insurance coverage. I understand that purchasing insurance can be a very confusing process, and can certainly see how you may have made this mistake, but unless you can show that the insurance company intentionally misled you about the terms of the policy, you likely have little recourse against the insurance company. However, if you think that you do have a valid claim against the insurance provider, you should consult with an attorney in your area to discuss the legal options available to you.
I understand how frustrating this situation must be for you, especially since you though that you had full insurance coverage. Hopefully your finance company will work with you to help you pay off the balance of your loan in a way that works with your finance situation.
I wish you the best of luck in resolving this debt, and hope that the information I have offered helps you Find. Learn. Save.