On April 15th, what would have been tax day for millions of Americans, Stephania filed for bankruptcy. The South Carolina-based interior designer began to grow uneasy as local art shows and festivals canceled their engagements in late February due to the coronavirus outbreak. During her second week of quarantine, as still more clients pulled out of their contracts, Stephania was served with a lawsuit from American Express; she hadn’t been able to pay her credit card bill.
Faced with mounting debt, the artist turned to Upsolve, a company that provides the software tools needed to declare personal bankruptcy—all for free. While the months ahead remain uncertain, Stephania has taken the first step toward a more secure financial future.
Through technology and targeted OKRs (Objectives and Key Results), Upsolve has managed to tackle the deeply entrenched problem of debt relief, ensuring a more equal protection under the law for those who suddenly find themselves financially insolvent. As the coronavirus outbreak halts our economy and craters global stock markets, many millions of small business owners and laid-off employees are now faced with extraordinarily difficult financial choices. Upsolve is poised to help these Americans reenter the economy, recover their personal finances, and weather a predicted worldwide recession, without ever having to set foot in a courthouse.
For many low-income Americans, Chapter 7 Bankruptcy is a critical debt relief tool: a way to escape exorbitant medical bills or predatory lenders, to recover from a divorce, job layoff, natural disaster, even a global pandemic. Bankruptcy can improve one’s credit score, increasing their chances of securing a job. But the process comes with a hefty price tag; individuals frequently can’t afford the $1,200 needed to secure a bankruptcy lawyer (the right to an attorney is only guaranteed in criminal proceedings, not civil cases). And layers upon layers of legal complexity make navigating bankruptcy paperwork all but impossible without one.
Upsolve was created to address this glaring inequity: a digital transformation in social service, the company was designed to help people solve their own legal problems. “I started Upsolve at Harvard’s Access to Justice Lab, because I recognized a market failure of technology in the private sector,” says Rohan Pavuluri, the company’s CEO and co-founder. Pavuluri believed that tech could be exploited to provide debt relief. For inspiration, he looked to Turbotax, a software program that helps individuals navigate the complicated tax world, and in 2018 set out to create a similar product that addressed personal bankruptcy.
“Ninety percent of bankruptcy is caused by a layoff or medical emergency—shocks that can happen to anyone,” says Pavuluri. “But most Americans do not have enough money to cover the financial shock. Their rights are contingent on their ability to pay for those rights.” In the throes of COVID-19, personal bankruptcy will likely become a fact of life for many. Entire states are even considering it. But while corporations regularly declare bankruptcy to continue operating and Wall Street investment firms have spawned an entire cottage industry based on corporate restructuring, personal bankruptcy remains profoundly stigmatized and problematically inaccessible.
When a person is unable to pay their creditors, they may file for bankruptcy in federal court under Chapter 7, which orders a troubled business to cease operations. If the individual can afford to initiate the process through legal counsel, a trustee is appointed immediately upon filing; this trustee may exercise broad powers to examine the individual’s financial affairs, liquidate assets and distribute the proceeds to creditors. But the bureaucratic red tape and byzantine procedures guarding this process are legendary: official forms (downloadable as a single PDF document) offer no instructions to guide a debtor. Although the digital format might seem convenient at first, each form must be filled in separately, and its simple templates obfuscate the true complexity of bankruptcy law.
In stark contrast, Upsolve guides users through a simple, step-by-step process. Users fill out an online questionnaire about what they earn, spend, own and owe, information which is used to automatically populate the requisite forms. Users can then print the results and file them with the court. For more complex cases involving home-ownership or expensive assets that Upsolve alone cannot handle, users have the option to get a free evaluation from a private attorney. These partnerships benefit all involved: Upsolve earns a small fee each time a lawyer provides an evaluation, attorneys themselves generate more business (approximately five percent of those who opt into a free evaluation), and users of Upsolve have affordable access to the legal counsel they so desperately need.
“Bankruptcy lawyers have a monopoly on the law because we don’t allow non-lawyers to provide meaningful legal assistance in this country,” explains Pavuluri. He offers a striking analogy: “If you have a headache, you can go get over the counter Advil. There’s no over-the counter legal remedy.” Establishment players maintain that a lawyer must always represent individual bankruptcy claimants, thereby abandoning a swath of people who have no resources—and perpetuating a system that is inherently discriminatory. But the engineering-led non-profit is changing that narrative. About 30% of all free nonprofit bankruptcies in the United States are now conducted by Upsolve. “In the long run, we hope to create a more equitable legal system,” says Pavuluri.
To that end, the company consistently applies metrics to its impact, relying on two guiding OKRs. First, Upsolve considers a quarterly debt-relief figure: that is, the amount of debt relieved for every dollar spent. Different teams are in charge of working toward that benchmark. Last year, the company helped nearly 3,000 people file for bankruptcy and relieved over $130 million dollars in debt. (As a point of comparison, approximately $1 billion in debt relief is recorded per year in the US.)
Second, Upsolve uses aggressive but realistic objectives and targeted results to measure capital efficiency and self-sustainability. For example, the organization monitored how much human time was spent reviewing each of the forms generated by its software, with the goal of reducing that time to under five minutes. Upsolve also implements OKRs to target its distribution channels and outreach, as well as to operationalize its content production and online branding, all of which generate traffic to the site and increase the number of daily users. Between 10 and 20 percent of those who create an online profile with Upsolve end up filing for bankruptcy through the company’s site.
Of course, a single bankruptcy filing is so much more than a number; each case symbolizes the social advocacy ethic fundamental to Upsolve’s mission. The startup covers half its expenses with revenue generated, allowing Upsolve to take a global view on scale and revenue, while simultaneously focusing on incremental improvements at the local level. Much of that success is attributable to the company’s digital platform and scalability: while most brick-and-mortar non-profits (think of organizations such as Legal Aid, Planned Parenthood or Red Cross) must maintain significant overhead costs, Upsolve leverages technology and its small team of workers to achieve a significant return on investment. “New ideas drive growth,” says Pavaluri. “Our next goal is a debt run rate where we’re on track to relieve $1 billion within the next 12 months.”
Putting metrics to a social justice mission keeps the organization disciplined, he adds. “You have to measure what matters, but you can also use OKRs to measure advocacy, and to think of ways to enact policy change and simplify standards,” he explains.
Indeed, experts see many more Chapter 7 filings ahead, and the industry’s ability to handle an influx of bankruptcy cases already appears taxed. Unlike unemployment claims, bankruptcy filings tend to be a lagging indicator of economic health, as business owners spend cash and look for various other means to stay afloat, but the forecast looks grim. Upsolve’s services are thus all the more critical: in the era of COVID-19, Pavulri’s organization manages to reconcile its ambitious goals and key results while maintaining the humanity and standards of care necessary to serve a marginalized community.
This piece is part of a two-part series featuring Upsolve. To read part two, click here.