Just when you thought it couldn’t get worse, now car dealers facing bankruptcy are putting already struggling consumers deeper into debt. According to an article in the Star-Telegram, many car buyers who traded in an older vehicle for a newer one are finding out that their old car loan has not been paid off by the car dealer.

Many car dealers are going bankrupt and are failing to fulfill their financial obligations to their consumers who have traded-in vehicles with outstanding loans on them. Usually, when a consumer trades-in a vehicle with an outstanding loan, the car dealer promises to pay off the old loan when they purchase the newer vehicle; but as more car dealers go bankrupt the ugly truth is coming to surface.

Many consumers are being pursued by creditors for old car loans on traded-in vehicles because the loans were never paid by the car dealer and consumers often have little recourse because the car dealer has gone bankrupt.

The article said:

When a car buyer still owes money on a vehicle he is trading in…Lenders can then go after the previous owner who thought the debt was paid, or repossess the car from the new owner who assumed it came with clear title.

“It’s devastating for people when it happens because they have two car payments and they can’t afford them,” said Rosemary Shahan, president of Consumers for Auto Reliability and Safety, a Sacramento-based nonprofit that lobbies on behalf of vehicle owners. “Their credit is destroyed for no fault of their own because the dealer defaulted.”

To avoid being stuck with two car notes by a car dealer who has gone bankrupt make sure that you thoroughly investigate the car dealer before you trade-in or purchase a used vehicle from them.