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When a person is unable to get out of huge debt, bankruptcy usually becomes a consideration. Alternatives exist that may just as effectively address the situation. Being able to rid yourself of debt without having to file for bankruptcy can take a load off your mind.

Only in very limited situations can people go to jail for failing to pay their debts.

One alternative is to do nothing because except for student loans and tax debts, creditors usually must sue debtors and receive a monetary judgment before being able to collect income or property to pay the debt. Loans that are secured by collateral, such as a car loan, serve as an exception, allowing collateral repossession.

However, creditors still cannot go after property and income of the debtor without going to court.

Legal exemptions often protect most of the property of a debtor, even if a money judgment is obtained. For example, Colorado has a homestead exemption and may also offer protection for retirement accounts, household goods, a majority of weekly earnings, clothing, and cars used for business purposes.

When property is covered by an exemption, a judgment is worthless.

If debts are turned over to a collection agency, debtors have rights. Agencies cannot make threats, harass, or lie about the actions they may take. The Fair Debt Collection Practices Act (FDCPA) is the federal law offering protection to individuals with collection accounts.

Many states have their own version of this law.

Debtors with cash can sometimes negotiate with creditors regarding the window for repayment or amount due. This does not mean that those in debt should use payday loans to pay adjusted debt balances. This just replaces one form of debt with another.

It is better to research federal and state programs and negotiate with creditors based on the balance in the bank account.