Auto Insurance Claims: auto accident, small claims court, finance agreement

Question
In September I was hit from behind from another driver, the police were called and he begged me not to make a report because he would go to jail.  The police arrived at the seen and sure enough they were going to take him in he was also here illegally.  I told the officer to let him go that we would settle it but i learned from my mistakes now.  I was told by the officer that his insurance was no good so I put the claim in through my insurance company.  The other driver rear ended me and my vehicle was not driveable.  At the scene he said it was his fault and he would pay for all the damages well now a month later my insurance paid for the damages and went after his insurance for the money but there is a balance of $2600 for the vehicle.  Now the other driver is feeling cocky and said he wasn't going to pay any money because his insurance told him he didn't have to because they were paying for the vehicle.  I explained to him that they did not pay for all of it and i do not think it is fair i have to pay for a vehicle that i don not have and he signed me a letter stating he would be responsible.  My question is to i have a case for small claims court i do not want to take advantage of any one i just want the whole car to be paid off?? Help me please.

Answer
Hi Rosy,

Unfortunately, you will not be able to collect the balance. When a vehicle is totaled as the result of an accident, the at-fault party is responsible for paying for the value of the car not the balance of your loan. Your financing arrangement is a seperate contract between you and the finance company. Often people are upside down in their financing. This means that they owe more than the value of the car. This could be due to a variety of reasons such as rolling the balance of a prior car into a new finance agreement or financing the car for too long or have bad credit causing the interest rate to be high. Any time you finance a car for longer than 3 years, you will always owe more on it than it is worth. Since the finance contract has noting to do with the value of the car, the only thing you are entitled to is the fair market value of the car.

I hope this helps
Richard Hixenbaugh