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Bankruptcy is a powerful tool for fighting predatory bills. This app helps you do it for free

The problem is that filing for bankruptcy can be prohibitively expensive. Upsolve wants to change that.

Bankruptcy is a powerful tool for fighting predatory bills. This app helps you do it for free
[Photo: Upsolve]

The irony of filing for bankruptcy in the United States is that those who need it most often can’t afford it. Hiring an attorney can cost $2,000 in legal fees, which you very likely won’t have if you’re going bankrupt. If someone who has lost everything tries to handle the paperwork themselves–with 23 jargon-filled forms–it can mean making a mistake that dooms the application.

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Upsolve, a startup nonprofit, designed a TurboTax-like software for bankruptcy to help. “Bankruptcy is a really, really powerful tool for low-income Americans who are victims of predatory loans, or exorbitant medical bills, or losing their job due to things like automation,” says Rohan Pavuluri, CEO and cofounder of the nonprofit, which was part of the 2018 class of Fast Forward, a Bay Area-based accelerator for tech nonprofits. “But it’s really impossible for people to file for bankruptcy on their own.”

Pavuluri started thinking about the problem as an undergrad at Harvard, where he volunteered at the law school’s Access to Justice Lab, a center that considers how to improve the legal system for people who can’t afford to hire lawyers. He helped develop a paper packet to help people step through the bankruptcy process, and kept working on the idea as he lived in Brooklyn over the summer of his sophomore year.

[Photo: Upsolve]

“I basically started visiting the bankruptcy courthouse every day, talking to people who were going through bankruptcy on their own, talking to lawyers, talking to legal aid lawyers, talking to judges,” he says. He met Jonathan Petts, a bankruptcy attorney who ended up partnering with him to launch the nonprofit. As the next school year began in the fall of 2016, Pavuluri was so invested in the idea that he ended up taking time off from Harvard to keep working. The paper packet began to evolve into a web app. The founders spent a year testing and improving a simple version of the technology with users in Brooklyn. In 2017, they started raising money to build out the service, which launched this year.

The web app, which can be used either on a computer or on a mobile phone, walks users through a simple questionnaire, asks them to upload documents like pay stubs and tax forms, and uses that data to automatically fill in the forms required for Chapter 7 bankruptcy. Some information is pulled in automatically from a credit check. Upsolve also gives an online financial lesson and a certificate, a step required by courts. An attorney, either from Upsolve or someone working with one of the nonprofit’s partner organizations, reviews the forms before they’re filed. But the process eliminates attorney-client interviews that can otherwise last two or three hours.

The claims are straightforward enough that it’s not necessary for people using the service to have an attorney in court. “What makes the case simple is if you don’t have any valuable assets and if you earn under the median income or you’re on social security or you’re unemployed,” says Pavuluri. “None of our users actually have assets. They don’t own a home and they don’t own expensive cars or jewelry, because we screen out for those.”

After launching first in New York, the nonprofit quickly expanded to 46 other states. There are minor differences between states, Pavuluri says, but 95% of the content is the same, making it easy to scale. So far this year, the nonprofit has helped forgive $8 million in debt.

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One challenge now is making sure all of the 20 million Americans who could benefit from Chapter 7 bankruptcy are able to use the tool. The nonprofit, which has raised around $1 million so far, is raising more money to expand to reach more people. “Bankruptcy has a negative stigma, unfortunately, and a lot of people don’t even know what bankruptcy is,” says Pavuluri. The nonprofit is producing new educational content to try to lead people who are searching online about debt problems to its service.

Learning about the free tool may also help some people avoid additional predatory services. A ProPublica investigation found that it’s common for scammers to prey on people who want to file for bankruptcy. Lawyers sometimes also encourage debtors to file for Chapter 13 bankruptcy; unlike Chapter 7, Chapter 13 doesn’t clear debts right away. It’s useful for people who have major assets they want to preserve. But for someone who has nothing of value, it often means making a deal with a lawyer to pay $0 down, and then being responsible to pay the lawyer’s fees of $3,000 or $4,000 through a payment plan. If someone fails to keep up with payments, their case can fail and they’ll have more debt than they did before.

Pavuluri believes that tools similar to Upsolve can also be useful for other legal problems. (Some related tools already exist, such as SoloSuit, a website that helps walk people through the process of being sued for debts they can’t afford, like medical bills.) Upsolve plans to work on tools that can also help people rebuild their credit and savings or learn how to budget after a bankruptcy.

“Our mission isn’t just to get people back on their feet, it’s to make sure they actually can stay there,” he says. “We collect so much data during the bankruptcy process on each of our users and we learn so much about how people can improve their lives…it would be a shame if we didn’t create products or services for users to help them really thrive post-bankruptcy.”

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About the author

Adele Peters is a staff writer at Fast Company who focuses on solutions to some of the world's largest problems, from climate change to homelessness. Previously, she worked with GOOD, BioLite, and the Sustainable Products and Solutions program at UC Berkeley.

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