Auto Insurance Claims: Uninformed insurance claim, driving without insurance, several thousand dollars

Question
Hi,
I got into an accident on 10th Dec 2007 and at the moment i didnot have any insurance, even my license got expired. Fault was by the other party but we just exchanged information with a COP who was witness for the accident. Both of us left the place with each others information. COP didnot give me any ticket since i didnot possess valid license or insurance and left me. I thought that the guy will not file a claim with his insurance company as discussed at the time of incident. But now he filed a claim and i recieved a bill from the other part's insurance company which says that their investigators have declared the fault is entirely mine. Now the point is that how come the insurance company decide my fault without even my licence or other information. The guy just has my phone number and that is it. I have even sold the car in a junkyard after the accident. What can i do in this situation. do i really need to pay the other partys insurance company. The letter which i recieved says that if i dont respond within 10 days it will be reported to collections. If at all i need to pay any money, i cannot do that now since i dont have any. i need atleast 6 months to get off with such a large bill. Let me know what can be my next steps?

Answer
Hi Mithil-

It sounds like have made some pretty big mistakes here.  First of all driving without insurance could be something that could ruin you for the rest of your life.  Last week I got a question from a woman who's husband had been hit while riding a motorcycle and he is now in a wheelchair for the rest of his life.  His medical bills are several thousand dollars and they are seeking lost wages for the rest of his life, since he can no longer work.  The driver of the other car was not insured so he most likely have a judgement issued to pay several hundred thousand dollars out of whatever he has including wage garnishment.  You should feel lucky that this is not what you are looking at and don't drive again until you have a lisence and good insurance with bodily injury limits of at least 100,000 per person.  
The way fault would normally be determined in this case is by the adjuster looking at the police report if any and  getting a statement from both drivers and looking at both cars.  It's not clear to me why they never called you for your side of the story unless they tried and were not able to reach you.  If you avoided them that was why they went ahead and made the determination without your statement.
If you really want to say that you weren't at fault and the police officer will back you up, then you should call the company and tell them that you want to dispute the at fault determination.    
The only other thing I can offer you is that you can contact the insurance company and see if you can work out a payment plan.  If you wait until it goes into collections it will be too late, because then you will most likely be dealing with someone alot less willing to work out a deal.  
I guess we all make mistakes in life- It's just important that we learn from them so we don't repeat them.  

Good Luck,
Sheldon Maughan
Sacramento, CA