When she was laid off from a job in the Bay Area and had to move out of state to care for a sick relative, a woman named Shyra struggled financially. She found a new job, but it only paid $8 an hour, and after some unexpected expenses, she was soon deep in debt. She eventually moved back to California and found a better job, but learned that her wages would be garnished to begin paying off her debt–after excessive interest rates, a staggering $50,000.
Shyra, who asked to withhold her last name, later met with a lawyer to talk about declaring bankruptcy, which could cancel her debts, but learned about the paradox of the system: The process is so expensive that the people who need it most can’t afford the legal fees to file the necessary paperwork. “It didn’t make sense that [the lawyer] would charge me $4,000 when I’m struggling to even pay my bills,” she says. She thought that bankruptcy wouldn’t be an option. But she then learned about a new, quickly growing nonprofit that uses software to fill out and file the paperwork at no cost for low-income clients. She used the technology, and her family got a new start.
The ability to file for bankruptcy and reorganize your debts is an incredibly powerful tools to help struggling low-income people overcome financial hardship, but the complexity of the process shuts many people out. It requires 23 jargon-heavy forms, and it’s not something that someone can easily accomplish on their own–but people who need it can’t often afford lawyers to help them. “We exist so that we can help people maintain a decent livelihood where they don’t starve and they don’t end up on the street,” says Rohan Pavuluri, CEO and cofounder of Upsolve, a nonprofit that makes a Turbo Tax-like web app of the same name. “They don’t have any money to afford a lawyer.” In total, he says, roughly 20 million low-income Americans could potentially benefit from bankruptcy, whether they’ve landed in debt from medical expenses, the loss of a job, or predatory loans.
Since it launched in 2018, Upsolve–a winner of Fast Company’s 2019 World Changing Ideas Awards in the Social Justice category–has helped more than 500 people erase their debts, more than any other nonprofit; other nonprofits have a slower process where caseworkers can only help one person at a time. By using software that automatically fills in forms, a process that would normally take an attorney hours shrinks to five minutes of review. Eventually, using machine learning, the entire process could be automated. That makes it possible, Pavuluri says, to begin to scale up to reach the millions of Americans who could benefit from bankruptcy but don’t see it as a viable option now.
The nonprofit, which recently completed a stint at Y Combinator and raised money from investors including Vinod Khosla and the Hewlett Foundation, is also developing an operating model that is financially sustainable. If someone comes to the startup’s site and doesn’t qualify for the free service because their income is too high or they own a home, the startup will refer them to an attorney and earn a referral fee. Right now, Pavuluri says, attorneys typically spend roughly a third of the money they earn from a client on acquiring that client. Those fees, along with optional tips from the free clients that Upsolve helps, should help the nonprofit run without relying on donations. “We want to grow exponentially,” he says. “It’s very hard to fundraise to grow exponentially because the fundraising doesn’t scale with the number of users that you want to help.”