A bankruptcy lawyer told BuzzFeed News she would guess that number is probably substantially higher.
At least 24 women who currently or formerly sold clothing through Lularoe have filed for bankruptcy in the past two years, and many of them have seen income from their “small business” decline dramatically in recent months.
Pamela Foohey, an associate professor at the Indiana University Maurer School of Law who is an expert in bankruptcy law, reviewed nine of the cases for BuzzFeed News.
“The thing that really stood up to me the most, was individually and taking all the nine cases I looked at in conjunction, was the steep dropoff in income from the Lularoe business over the years,” she said.
Additionally, although BuzzFeed News found 24 bankruptcy cases where Lularoe was listed as a business alias in court records, Foohey said she would guess that number is probably substantially higher.
“I would guess there are a lot more cases in which Lularoe businesses impacted a consumer bankruptcy case,” Foohey said.
She said this is because not everyone will list their business alias on a personal bankruptcy filing. Four of the parties filed for Chapter 13, while the rest filed for Chapter 7.
A spokesperson for Lularoe told BuzzFeed News they did not have comment on the bankruptcy cases.
“It would be inappropriate to comment when we have no information regarding the personal circumstances under which an individual may have decided to file a petition in bankruptcy,” the spokesperson said. “We work very hard to support the 80,000 independent fashion retailers who sell Lularoe product and hope they all meet the goals they have set for themselves.”
Foohey said she noticed on average that the families reported a “quick downward fall” in income from their business from around 2015 to when they filed.
Take one woman, a single mom whose initials are “C.M.,” who filed for bankruptcy in California in July of 2017.
In 2016, C.M. reported she made $61,330 from “operating a business,” which is presumed to be her Lularoe business since it is the only one she says she owns.
But from January to July 2017, she had only made $10,547.42 from her business, less than half she had made midway through the year before. C.M. reported her average net income in 2017 from her business was $184.39 a month.
C.M., according to the filings, was spending just as much in some months, if not more, on “operating expenses” for her business as she was making. For example, in May 2017 she earned $1,796.12, but spent $2,666.13 to keep her business afloat.
C.M. also lists among her $28,991 in assets $8,000 worth of “inventory.” Her $85,253.43 in debts include thousands on multiple credit cards and almost $1,000 owed to her Paypal merchant account.
Foohey said C.M.'s case shows a “massive drop” in income, which she said she saw “across the board” in the cases she reviewed.
Another case, A.B., who filed for bankruptcy with her husband in Washington state in June.
A.B. lists her business alias as “Lularoe” with her name, and lists her occupation as “fashion retailer.” Her husband says he is a construction manager.
A.B.'s records also show a drop in sales. In 2015, she says she made $15,000 from her Lularoe business. However, her profits dropped to $400 in 2016 and $0 in 2017.
The couple has several thousand dollars on credit cards, as well as $31,700 in student loans. A.B. says in the filings she has about $7,000 in Lularoe merchandise.
“The figures show a deep drop, which aligns, not causation but correlation, with the story that Lularoe expanded too quickly and ate into their initial sellers' market and/or that the merchandise is problematic,” Foohey said.
Neither woman responded to BuzzFeed News' request for comment about their case.
Foohey said in her professional opinion, the cases she reviewed were pretty typical of most Chapter 7 cases in terms of the debt and assets listed.
“To me they are average cases with the exception that there's more credit card debt because, seemingly, the Lularoe business,” she said.
She said some of the women involved also listed unpaid unsecured business loans, which shows a “clearer tie to the Lularoe” business.”
“If you're planning on making $50,000 in one year, and only make $10,000 the next year, and you're running a Lularoe business where you have to pre-buy inventory to then sell to others, that could account for the huge amounts outstanding on credit cards and your inability to meet your debts going forward,” she said.