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Personal Bankruptcy

The use of credit, and the accumulation of debt, is common in the U.S. economy. At times, personal debt overwhelms an individual or a household due to job loss, divorce, unanticipated medical expenses, credit abuse, or other financial difficulty. In many cases consumers who have fallen into serious debt can be guided out of their financial quagmire with assistance from a state consumer credit counseling service or, perhaps, a nonprofit debt consolidation firm. At other times, personal bankruptcy is the only viable solution to unsustainable personal debt.

Bankruptcy is a formal acknowledgement that an individual or business firm cannot repay its creditors. Personal bankruptcy is considered an action of last resort because it often results in the liquidation of personal assets, the loss of future credit, or other limits on the individual's freedom of choice. The Administrative Office of the U.S. Courts announced the filing of 1.2 million bankruptcies in 2012. Of this total, 96.7 percent were nonbusiness or personal bankruptcies, and the remaining 3.3 percent were business bankruptcies, as shown in Table 4.4.[1]

Most personal bankruptcies are filed under Chapter 7 or Chapter 13 of the U.S. bankruptcy code. In 2012, nearly 70 percent of all bankruptcies were filed under Chapter 7 of the code. Chapter 7 bankruptcies permit the courts to sell off most of the person's belongings in an effort to repay a portion of the individual's debts. Taxes owed to the government are paid off first. Typically, there is little money remaining to satisfy other creditors. Some financial obligations cannot be cancelled under Chapter 7, such as child support payments to a former spouse or student loans. The Bankruptcy Abuse Prevention and Consumer Protection

Table 4.4 Personal and Business Bankruptcy Filings, 2008–2012

Bankruptcies

Year

Personal

Business

Total

2008

1,074,108

43,533

1,117,641

2009

1,412,838

60,837

1,473,675

2010

1,536,799

56,282

1,593,081

2011

1,362,847

47,806

1,410,653

2012

1,181,016

40,075

1,221,091

Source: Administrative Office of the U.S. Courts, News Release, February 4, 2013.

Act of 2005 made filing under Chapter 7 of the code more difficult. This 2005 law required some people with higher incomes—incomes higher than the median income in the filer's state—to file under Chapter 13 of the code instead. Bankruptcy applicants must also undergo credit counseling as a condition of filing for bankruptcy.[2]

Chapter 13 bankruptcy, also called the wage earner's plan, represented 30 percent of all bankruptcy filings in 2012. Chapter 13 bankruptcy offers some benefits to both the creditor and the debtor. Creditors benefit because they are repaid, in full or in part, in installments spanning three to five years. A court-assigned trustee collects money from the debtor each month and disperses debt payments to creditors in accordance with the terms outlined in the bankruptcy. Debtors, in turn, are protected from creditors. Creditors cannot contact or harass the debtor or lay claim to the debtor's assets such as house or car. Of course, any bankruptcy damages the debtor's credit score and creditworthiness.[3]

Consumer Cooperatives

The National Cooperative Business Association (NCBA) defines cooperatives as “independent, self-help organizations, owned and controlled by their members for the benefit of the members.”[4] Cooperatives, also called co-ops, share certain values and beliefs. Chief among these beliefs is that co-op membership is voluntary and its structure democratic. Co-ops also value their own autonomy and support the work of other cooperatives. Coops are deeply concerned about the well-being of local peoples and local communities. Co-ops show this concern in many ways as they provide valuable and affordable services and goods to members, create employment opportunities, and render charitable assistance when possible.

There are several major types of cooperatives operating in the U.S. and global economy. Three leading co-op types include consumer co-ops, producer co-ops, and worker co-ops. A consumer cooperative is a nonprofit, member-owned business designed to provide services or goods to co-op members. A producer co-op is a firm that brings producers together, mainly in the agricultural sector of the economy, to store and market their output at more favorable prices. A worker co-op is a firm owned and operated by its employees. On the global level, cooperatives employ more than 100 million workers and have in excess of 800 million members.[5]

During the early 2010s a total of 30,000 co-ops operated in the U.S. economy, serving the needs of 100 million Americans. Of this total, 27,000 were consumer co-ops, with lesser numbers of producer co-ops, worker co-ops, and other types of co-ops.27 Consumer cooperatives expand consumer power in the economy by creating more competitive markets and offering goods at reasonable prices. Profits earned by a consumer co-op are typically distributed to co-op members or shared with local communities.

Consumer co-ops in the United States provide services in many different industries. According to the Consumer Federation of America (CFA), consumer co-ops are especially important in providing financial services, electricity, and telecommunications services— including Internet access—to members. Consumer co-ops also supply food, housing, preschool education and childcare, health care, insurance, college book and food services, and funeral arrangements.[6] Some consumer co-ops are large businesses that serve millions of members. For instance, the largest credit union in the United States, Navy Federal, is a consumer co-op. It has 3.9 million members and $47 billion in assets. Navy Federal accepts deposits, makes consumer loans, offers checking-type accounts, and provides a variety of other financial services to members.[7]

In the global economy, consumer and producer cooperatives have become highly effective enterprises “that put people at the center of their business and not capital.”[8] In the global economy co-ops conduct business activity in virtually every major industry, ranging from agriculture and fisheries, to banking and insurance, to tourism and transportation. These co-ops support economic development in poorer world regions, while their core principles advance democracy. The International Co-operative Alliance (ICA), the world's largest nongovernmental organization (NGO), supports co-ops through lobbying, education and training, and technical assistance. The ICA represents 265 member organizations from 96 countries and defends the right of co-ops to serve nearly 1 billion people.[9] The United Nations proclaimed 2012 as the International Year of Cooperatives to accent the positive role of co-ops in achieving sustainable economic development, higher living standards, and democracy.[10]

Sustainable Consumption

Sustainable consumption is the ability to satisfy people's present consumption needs without undermining the world's capacity to meet the consumption needs of future generations. Sustainable consumption applies to the purchase or use of resources such as water or petroleum, as well as final goods such as food, household appliances, and motor vehicles. It also applies to the decisions made by all consumption units, including households, businesses, and governments.

Sustainable consumption in the global economy is supported by a number of international agreements. The landmark Agenda 21, which was adopted by the Rio Earth Summit in 1992, made a compelling link between unsustainable consumption and irresponsible production methods on the one hand, and global poverty and environmental degradation on the other. Agenda 21 recommended a global shift in lifestyles and consumption patterns, particularly in industrialized countries. It called for more efficient and “green” production methods, the use of new and renewable energy resources, the development and sharing of green technologies, the creation of recycling and waste reduction programs, and the dissemination of information about ethical consumption through education, public awareness programs, advertising, and other means.

Sustainable consumption was formally added to the United Nations Guidelines for Consumer Protection in 1999. Consumers International (CI), a nonprofit federation of consumer groups and nongovernmental organizations (NGOs), was instrumental in framing the sustainable consumption addendum to the UN guidelines. The revised UN guidelines asked governments to introduce sustainable consumption practices into their own

One goal of sustainable consumption is to reduce waste, particularly in the industrialized countries

One goal of sustainable consumption is to reduce waste, particularly in the industrialized countries.

operations, finance green research and development (R&D), end subsidies to inefficient producers, and require businesses to pay for external production costs such as pollution.

In the early 2000s the United Nations Environment Program (UNEP) reported slow progress in implementing the sustainable consumption recommendations outlined in the UN guidelines. A UNEP survey cited high compliance with sustainable consumption guidelines in Australia, Belgium, Brazil, the Czech Republic, Denmark, Estonia, Finland, Hungary, the Republic of Korea, Mexico, Nicaragua, Sri Lanka, and Sweden. Lower compliance with the UN guidelines was recorded in Bulgaria, Burundi, Costa Rica, Cote d'Ivoire, Cyprus, Ecuador, Haiti, Kenya, and Zambia.[11]

  • [1] Administrative Office of the U.S. Courts, “Bankruptcy Filings Decline in Calendar Year 2012,” News Release, February 4, 2013, Washington, DC: U.S. Courts
  • [2] U.S. Department of Justice, “Bankruptcy Reform,” Washington, DC: Department of Justice, November 3, 2011; Administrative Office of the U.S. Courts, “Chapter 7: Liquidation Under the Bankruptcy Code,”
  • [3] Administrative Office of the U.S. Courts, “Bankruptcy Filings Decline in Calendar Year 2012,” News Release, Washington, DC: U.S. Courts, February 4, 2013; Administrative Office of the U.S. Courts, “Chapter 13: Individual Debt Adjustment,”
  • [4] National Cooperative Business Association (NCBA), “About Co-Ops,” 2011
  • [5] International Co-Operative Alliance (ICA), “What Is a Co-Operative?” June 16, 2010
  • [6] National Cooperative Business Association (NCBA), “Consumer Cooperatives,”
  • [7] Consumer Federation of America (CFA), The Cooperative Difference: Consumers Helping Themselves to Meet Needs and Save Money, Washington, DC: CFA.
  • [8] International Co-operative Alliance (ICA), “Co-operative identity, values & principles,”
  • [9] Ibid.
  • [10] United Nations, “United Nations, International Year of Cooperatives 2012,”
  • [11] United Nations Environment Program (UNEP) and Consumers International (CI), Tracking Progress: Implementing Sustainable Consumption Policies, 2nd ed. (New York: United Nations Publication, 2004), 64
 
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