The people getting burned are the buyers.
The dealership fails to pay off the remainder of the debt on the trade-in car before selling it to another party.
Then the dealer folds, and the original owner’s lien-holder goes after the purchaser.
This is the reason you research real-estate before buying. Now it looks like you’re going to have to get a lawyer to buy a new car.
Actually, the only thing you need to do is get a lien waiver from the dealership at the time of the deal. That will protect you from kind of thing.
This is just a matter of routine practice in the building trades. Although a contractor has paid his bills completely, if the supplier has not made payment to its supplier; the supplier will track down the final possession of those materials and collect from there. New home buyers should be acutely aware of this fact and get the waivers.
And the only one who ends up with a new car is the lawyer.