
Launch HN: Upsolve (YC Nonprofit W19) – TurboTax for Bankruptcy - rpavuluri
Hi HN! I’m Rohan Pavuluri, co-founder of Upsolve (<a href="https:&#x2F;&#x2F;upsolve.org&#x2F;" rel="nofollow">https:&#x2F;&#x2F;upsolve.org&#x2F;</a>), a nonprofit in YC’s W19 batch. We provide software for low-income people in America that makes filing for bankruptcy less painful and expensive, just like what TurboTax did for filing taxes. Bankruptcy is a lifeline for low-income people in the United States who fall into debt from job loss, medical emergencies, and payday lenders. It allows them to get a fresh start. Unfortunately, it’s impossible for most people to file for bankruptcy because they cannot afford $2,000 for a bankruptcy lawyer. Our average user erases ~$40,000 in debt.<p>I started Upsolve when I was a law school research assistant in college. We were testing out the effectiveness of legal self-help packets for people who could not afford attorneys. I set out to turn these paper packets into a digital product. My co-founder Jonathan Petts spent ten years doing pro bono bankruptcies in his spare time as a corporate attorney. This is where he saw people turned down by brick and mortar legal nonprofits because demand for attorneys far exceeded supply. A judge introduced us in 2016 when she saw we were working on the same idea.<p>Here’s how it works. A user comes to our website and takes a screener to see if they’re a good fit for our service. If they are, they answer a series of questions about their personal finances, upload their tax returns&#x2F;pay stubs, and take a pre-bankruptcy education course. Our software then generates their forms, and one of our in-house attorneys reviews their forms for accuracy and completeness. If there are any issues, we follow up. When the forms are ready to file, we send them to the user. We track the user’s court notices so that we can fix any issues that may arise after filing. In 2018, we erased over $16,000,000 in debt for 400+ users.<p>We believe that 20M Americans would benefit from filing for bankruptcy. We currently allow our users to donate what they think is fair to us after they complete the process. While we’re mostly funded by foundations and the federal government now, we hope to be sustainable through donations that we receive from our users in the future. Regulations around bankruptcy only permit attorneys providing full-representation to charge clients.<p>We’re looking for any feedback you have on our product or how to reach new users.<p>User stories: <a href="https:&#x2F;&#x2F;upsolve.org&#x2F;fresh-starts&#x2F;" rel="nofollow">https:&#x2F;&#x2F;upsolve.org&#x2F;fresh-starts&#x2F;</a><p>TC: <a href="https:&#x2F;&#x2F;techcrunch.com&#x2F;2019&#x2F;01&#x2F;16&#x2F;upsolve-bankruptcy&#x2F;" rel="nofollow">https:&#x2F;&#x2F;techcrunch.com&#x2F;2019&#x2F;01&#x2F;16&#x2F;upsolve-bankruptcy&#x2F;</a><p>If interested in donating: <a href="https:&#x2F;&#x2F;upsolve.org&#x2F;donate&#x2F;" rel="nofollow">https:&#x2F;&#x2F;upsolve.org&#x2F;donate&#x2F;</a> or email rohan@upsolve.org.
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mchannon
The catch-22 in the bankruptcy business is how your clients pay you if you
help them prove they're broke. So this is a huge need.

You need to put FREE in big red letters at the top of your webpage. It's on
there a few times but buried so it doesn't stand out. The word "non-profit"
also needs to be more prominently mentioned.

Whether it's sneaky medical billing or identity fraud, the about-to-be-
bankrupt are _really_ gun-shy about being scammed and this additional
marketing effort would pay huge dividends.

Most people don't realize how crooked the whole "education course" thing is.
Congress in its infinite ignorance decided that bankruptcies were due to lack
of education (easily debunked) but that doesn't stop them from making every
single chapter 7 applicant take hours of compulsory courses. Do you offer the
courses as a free standalone product (one that's accredited)? That'd be a huge
selling point by itself.

"Turbotax for Bankruptcy" carries a lot of negative connotations, because
you're not rent-seeking regulatory captors. Should make it "free turbotax for
bankruptcy".

Just as a small percentage of turbotax filers have to deal with audits,
hearings, and the occasional fraud trial, would be interesting to hear how you
all deal with the bankruptcy court analogs.

~~~
rpavuluri
This is all great advice. We try to stress "free" and "nonprofit" but should
definitely do more.

As you likely know, all of our users have to attend a "341 hearing" at the
court, where the trustee who oversees their case verifies the information in
the user's forms. We have a video of a mock 341 hearing that prepares our
users for this meeting, which they've found very helpful.

~~~
baking
I helped my brother-in-law file without an attorney a number of years ago and
I found that even though he is very intelligent, his case was simple, and I
walked him through it he had tremendous difficulty representing himself in
court and understanding the process to the level of detail needed to answer
even simple questions put to him by the judge. Perhaps your videos could help
people who have trouble thinking abstractly.

~~~
rpavuluri
Awesome idea. We have several videos up on Youtube now and hope to expand in
the coming months.

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mark212
I would strongly urge you to create a white label version of this and sell it
to consumer BK lawyers. I used to practice in this area and the biggest pain-
point by far was handling the documents from the clients and turning that into
PDFs of the petition and schedules to upload to ECF.

Sounds like your tech stack is already worked out on that, so why not white
label it to debtors firms? The typical SaaS billing levels (Starter / Pro /
Enterprise) would work, and you could offer a paid-by-the-filing level, too.
Roll in the pre-filing counseling and the electronic filing and you've got a
really good and attractive solution.

Especially as this is built for self-service. If a lawyer could have an in-
person counseling session with a prospective client, then point him/her at a
webpage to fill out the details and upload docs, that would save an enormous
amount of time.

It's been a couple of years since I look at the filing software, but the
industry was dominated by a couple of big players and the client-facing
solutions were minimal and sketchy. The big advantage was being able to file
electronically. But it still needed a couple of dedicated paralegals / clerks
to track down all the papers and enter all the details.

Good luck to you!

~~~
jchung
@rpavuluri: If at any point you were to move forward with white labeling and
selling that, I would recommend you consult a lawyer about whether the IRS
would consider this unrelated business taxable income (UBTI). Too much UBTI
can put your 501c3 status at risk. IANAL / IANYL / YMMV / etc.

~~~
fanzhang
I think generally UBTI refers to income that is actually unrelated to the good
the nonprofit purports to do.

For example, Princeton a nonprofit can totally charge tuition and use it as a
base of funding, and not pay taxes on that. They can even sell their students
food in cafeteria and not pay income tax. [1] But they can't start a food
franchise and not pay tax.

This software seems clearly within their registration statement. Now if they
started selling software consulting as their major source of funding...

In any case, I agree checking with your accountant is the best.

[1] [https://fms.iu.edu/tax/ubit/](https://fms.iu.edu/tax/ubit/)

~~~
rpavuluri
Thanks for the tips. We will definitely consult professionals for their
advice.

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elektor
Wonderful work, Rohan! I love it when tech and charity come together like
this.

My questions:

1) Is there any assistance that your service can provide to students who have
student loan debt, particularly those from predatory private institutions?

2) Have you had any conversations with the group, RIP Medical Debt? They have
a similar goal of helping those in need, they've abolished $120 million in
medical debt for about 60,000
Americans([https://www.ripmedicaldebt.org/about/](https://www.ripmedicaldebt.org/about/)).
I think it would be great for you to connect, even if it's just to be on each
other's radar.

~~~
rpavuluri
Thank you :)

(1) Sadly, we're not able to assist people who want to discharge their student
debt through bankruptcy. If that's the case, we suggest our users seek full-
representation.

(2) I've spoken to the co-founder of RIP Medical Debt! They're doing awesome
work I admire. Thanks for the tip.

------
asdf333
An awesome service for helping people navigate bankruptcy! congrats on a great
idea. clearing debt is an important function of capital markets and is one
thing that makes the US economic system so robust.

congrats and:

1\. I hope you guys find some good revenue streams to keep it going.

2\. I hope you can prevent people from scamming the system and hiding assets,
etc. Otherwise you can be the farmer that killed the golden egg laying goose.

------
ramarkable
Perhaps I am in the minority here, but I think Turbotax for Bankruptcy is a
helpful analogy. You should also look at the Free File Program Turbotax runs -
while it's gotten some heat for not being 'Free For All' it is a free (and
useful) service for lower income individuals who do bring in an income. They
partner heavily with libraries to ensure that people who may not have
internet/computer access at home, are aware of this offering. Probably some
overlap in demographics here.

As for the funding model: are there any businesses that stand to benefit from
people being able to file for bankruptcy more easily? Collection agencies?
Hospitals? There is a certain cost associated with tracking down a non-payer.
Who could stand from this cost being eliminated? Non-profit is well and good,
but it's even better if a business will stand up a foundation to specifically
fund your product because it supports their revenue generating business.

~~~
rpavuluri
I agree. We've been in search for the last two years for a business that
seriously benefits from our work. Have found people who see our work as "nice
to haves" but have not found any businesses that view our work as mission
critical to what they do.

~~~
ramarkable
Perhaps it's an acquisition play - as the other comments on the thread point
out: if it helps offload work from attorneys (who could be making money from
clients with resources) and/or can somehow serve as a philanthropic endeavor
for a profitable company (or organization) in desperate need of some good PR
(big law firms doing work for questionable foreign nationals, pay day lenders,
etc.), there is some intangible value to be had. A nice diversion from people
calling on lawmakers to regulate a company out of business can be motivation
enough to look in to opening up a more charitable, less profitable, line of
business.

------
gyaniv
To find new clients I think that by introducing yourselves and your product to
those "brick and mortar non profits" you said turned people away, you should
be able to convince them to send your way some of the people that they can't
handle.

But I have to say that the idea you had about the money source sounds a bit
strange to me. Your whole idea is helping people that don't have any money, so
it just seems weird that you would then ask for or even want their money,
because that somewhat defies the point of helping them save money (I'm sure
that you probably take only small amounts, but still...). I think that working
from outside donations and federal grants just makes more sense. Or maybe even
excepting some money from some of the people you help after a while if they
manage to get back on their feet.

~~~
rpavuluri
When we started, we never thought we'd ask our users for donations after they
filed. We got the idea when our users started asking us whether they could
donate to us even when we didn't ask for anything. The vast, vast majority of
our operating budget is covered at the moment by foundation philanthropy and
federal grants, but the hard thing about outside fundraising to stay alive is
that it requires a lot of time we'd rather use to focus on making our product
better and reaching more people. That's why we'd love to be sustainable if we
can make it work. We found inspiration in business models of EarnIn and
GoFundMe.

We also let our users know that they can donate well after their discharge
when they're back on their feet.

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toomuchtodo
This is work worth doing. Wishing your team much success.

To find new users, I'd start partnering with non-profit financial counseling
groups that are most likely providing this service with human effort, but are
stretched thin.

~~~
rpavuluri
We agree with trying to partner with other financial nonprofits, and we're
continuing to work with several, such as Single Stop in NYC. One challenge
we've found is that many nonprofits do not know much about bankruptcy or are
afraid to make referrals due to the negative stigma. Part of our job, we've
realized, is to educate them and the general public to solve this knowledge
gap.

------
froindt
Neat idea, thanks for sharing!

Are attorneys licensed in all the states they're reviewing documents to?

Playing devils advocate here. Do you have a vetting policy for whether filing
for bankruptcy is a good idea, or encourage other steps to be taken by someone
considering bankruptcy? Someone who is $2,000 behind on bills may be hurt more
by the bad mark on their credit in the upcoming ~7 years. If they had some
counseling on budgeting, debt payback could be realistic by digging in, taking
on some marginal work, and reducing spending.

~~~
rpavuluri
Thanks so much! We agree that bankruptcy should be the last resort for
everyone. That's why we only let people through who have over $10,000 in debt.
We also have 100+ other substantive checks to stop people from using Upsolve
if we're not the right service for them or if we don't think their bankruptcy
will be successful. For example, we don't help homeowners because our system
is not yet ready for more complex assets (like homes), and we think those
users would be better served via full representation. Bankruptcy is a federal
law with minimal state-by-state differences. Our in-house attorneys are NY-
based and never provide legal advice. Whenever legal advice is required, we
connect our users with someone in our network in the state where the user is
filing.

~~~
howard941
> Bankruptcy is a federal law with minimal state-by-state differences.

Unfortunately you're mistaken. The Code itself is federal but the underlying
debts and assets are always matters of state law. Exemptions: It depends.
Moreover, various provisions of the Code are construed quite differently
across the federal circuits. For example you're not getting your repo'd car
back in the 11th circuit once the creditor takes possession peaceably, period.

Perhaps the substantive checks take care of these state-by-state differences?

~~~
mark212
The fact that they’re not handling people who own real estate simplifies
things considerably and they have Attorney reviews to screen out the
complicated cases (from what I gather). But yeah the basics of a no-asset
Chapter 7 where the only secured debt is a car loan, I’d agree that state law
variations are minimal.

------
cenal
How do you handle security with such sensitive information being uploaded?

~~~
rpavuluri
Agreed that security is super important to us because information is so
sensitive and we serve a vulnerable population. We have an unusual benefit
with security because the bankruptcy process only requires a short-term
snapshot of financial information and the process can only happen every 8
years. We delete their sensitive information if a person finishes the process
or is inactive for 3 weeks since it will be out-of-date for the forms. We soon
aim to do filing on behalf of our debtors so they won't have to be concerned
with personal-information filled PDFs on their devices.

------
sytelus
Just love how so many startups coming from YC are becoming force of
disruption! The impact of this extends far beyond entrepreneurship and making
few people rich. I hope more YC companies goes after monopolies.

~~~
rpavuluri
Thanks so much! We wish there were even more nonprofits going through YC!

------
mlucy
Really cool idea. I hope you manage to get into a sustainable cycle of people
you've helped with bankruptcy getting back on their feet and donating to help
others in the same position.

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aurelius83
Cool idea. There's a little error on the where you agree to terms. The 3rd
bullet point is not broken out into it's own line item.

~~~
rpavuluri
Will fix! Thanks!

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spaceracer9
Most libraries run free legal help programs, that should be a great way to
find and help more people in need.

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josinalvo
do you have/could you share population data for your users?

like median earnings, median debt, nature of debt and such?

I am just curious and have no particular reason for asking, but it would be
interesting

~~~
rpavuluri
Yes! We have demographic data. Here are some bits I know off the top of my
head: \- Vast majority of our users earn under $32,000 \- Average unsecured
debt level is ~$40,000 \- Most debt is from medical bills, credit cards, and
payday loans \- 20% of our users are from NY and CA

