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Launch HN: Upsolve (YC Nonprofit W19) – TurboTax for Bankruptcy
149 points by rpavuluri on Jan 23, 2019 | hide | past | favorite | 38 comments
Hi HN! I’m Rohan Pavuluri, co-founder of Upsolve (https://upsolve.org/), 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.

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.

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/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.

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.

We’re looking for any feedback you have on our product or how to reach new users.

User stories: https://upsolve.org/fresh-starts/

TC: https://techcrunch.com/2019/01/16/upsolve-bankruptcy/

If interested in donating: https://upsolve.org/donate/ or email rohan@upsolve.org.

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.

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.

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.

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

Yes on negative connotations: the title "Turbotax for Bankruptcy" made me think this would be a hit piece on an unscrupulous vendor.

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!

@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.

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/

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

White label sounds interesting. Otherwise, better have great SEO or tons of cash for customer acquisition as I can't imagine there will be too many repeat customers.

Potentially around 40% [0]. More than I would have expected.

[0] https://www.uscourts.gov/sites/default/files/data_tables/bap...

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/). I think it would be great for you to connect, even if it's just to be on each other's radar.

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.

It's exceptionally difficult to discharge student loan debt in bankruptcy. Rare to even have someone try, quite honestly, given the state of the caselaw at this point. Basically have to be fully and permanently disabled to even have a shot at it.

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.

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.

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.

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.

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.

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.

most people filing for BK aren't really "people that don't have any money." It's a middle class problem: the truly poor have virtually no access to credit and are unlikely to have debt problems, while the well-off can save their way out of it. It's nearly always people with some income and employment who find themselves suddenly without enough to pay their debts.

Wiping out tens of thousands of dollars in debt (usually credit cards, but sometimes medical and lawsuit debt too) is a huge help.

Something as simple as a standard line at the bottom of every notice email sent to the debtor, to the effect of "We're a non-profit supported in large part by donations from satisfied users just like you. Please consider a small donation to pay it forward so we can continue to help people get a fresh start." With a link to your donation page.

One of the interesting ironies of philanthropy (of which there are many) is that people who have less money tend to be more generous philanthropically (as a % of adjusted gross income) than people who have more money. And because of the way the numbers work out, they give out a lot. If Upsolve can help a very very very large number of people get through bankruptcy, they might be able to amass a very strong "Pay it forward" revenue stream. Not sure if enough to fund the entire org, but enough to help out.

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.

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.

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.

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.

> 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?

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.

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

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.

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.

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

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.

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.

Will fix! Thanks!

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

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

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

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