Chicago personal injury lawyer Barry Zlotowicz here with the LawFull channel. If you haven’t figured it out yet, this channel is a great place for you to check out short videos on the legal topics that affect our lives. If you haven’t subscribed yet please click the button below. And if you have any questions or comments, feel free to reach out to me. If I can’t help you, I’ll find someone who can.

Dealing with a totaled car after an auto accident is a lousy experience. Let’s just get that out of the way. Let alone the fact that you have to deal with an auto insurance company. But, what happens if my Car is totaled and I owe more than its worth? In other words, you are upside down in your car. It’s a big problem.

According to Experian Automotive, around 86 percent of new car buyers finance their vehicle and the average new car loan is about $30,000 for roughly 68 months. So, people are financing millions of vehicles. As such, drivers who get in an auto accident are often faced with paying money owed on newly purchased vehicles long after their vehicles were declared a total loss.

So for example, let’s say you purchase a car for $30,000. You put $1,000 down and you finance $29,000 through a bank or the auto dealership’s finance company. A few months later you are involved in an accident and your car is totaled. You file a claim with your auto insurance company and they determine that the actual cash value (ACV) of your vehicle is $25,000.

What happens? You have an upside down car loan. Your auto insurance company will write a check directly to your finance company for the ACV of your vehicle and you owe the remaining balance outstanding of $4,000 or whatever it is. It’s unfair, you did not cause the accident but you are still on the hook for the balance outstanding.

So what do you do? Just call a lawyer? There’s not a lot a lawyer can do in this situation. The only way you can protect yourself from this situation is to purchase Guaranteed Asset Protection or GAP insurance. If your car is totaled, GAP insurance will cover the balance owed on the vehicle. So, in the situation above, your GAP insurance would have covered the difference between the $29000 you still owed on the car minus what the car was actually worth or $25000.

You can purchase GAP insurance when you purchase your vehicle from the dealership or you can likely purchase it from your auto insurance company.
Is it worth getting gap insurance? It just might be. I have a client who was just injured in a car crash, owed much more than the car was worth, but fortunately had gap insurance which paid for the difference between what she owed and the ACV of her vehicle.

How do you pay the balance owed if you do not have GAP insurance? Generally speaking, my clients in this situation have been able to continue to make their monthly payments until the balance is paid off. You may also be able to contact your finance company and figure out an alternative payment arrangement.

That’s not much help though to someone who just lost their investment in a vehicle including their down payment, has to pay money for a vehicle they can’t drive and may not have money for a down payment on a new vehicle.

If you are unhappy with your total loss car insurance settlement, you do have the option of contesting the valuation of your vehicle. You can try to get your own appraisal from a resource like Kelley Blue Book. That probably won’t work and as such, you will likely have to hire an appraiser to provide a new appraisal to give to the insurance company.

If that doesn’t work, you will have to demand arbitration from your insurance company. Now, if you are dealing with the insurance company for the driver who caused the accident, your option would be to file a lawsuit.

Now most personal injury attorneys won’t get involved in a matter that only involves property damage. It’s not that I don’t want to help or they don’t want to help. It’s just that as an injury attorney, I get paid on what’s called a “contingency” basis meaning I get paid out of your recovery for your medical bills and pain and suffering. We don’t get paid on property damage. Unfortunately, that will normally leave you with representing yourself or paying an attorney on an hourly basis to represent you.

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