Unless you have GAP coverage in your insurance policy, there may be little to nothing you can do. (If you're wondering what GAP coverage is, don't feel alone. Many accident victims are unaware of this type of insurance until it's too late.)
GAP coverage is designed to protect you in the event the value of your car is less than the balance of your loan.
The amount you owe on your auto loan - $12,500
Your car's fair market value at the time of loss - $7,500
Your insurance deductible - $500
The amount your insurance company pays you - $7000.
The gap between this amount and what you owe on your car - $5,500.
And it doesn't matter whether the accident was your fault or not, or whether you use your insurance company or go through the other person's insurance company. If you don't have GAP insurance, you will be responsible for the remaining $5,500.