Fear is one of the most prominent effects of debt problems. Most all of these fears are real, especially since the Supreme Court recently approved aggressive debt collection tactics that are borderline illegal. But some of these fears are largely exaggerated, and the interplay between consumer bankruptcy and a security clearance is one example of the latter.

Under DoD Directive 5220.6, financial problems are one of the thirteen problem areas that may lead to adverse action. It’s important to note that the document never mentions the word “bankruptcy,” and just like it is in many other areas, this procedure may actually be your way out.

Furthermore, when looking at the specifics of Guideline F, the financial problems that often lead to bankruptcy are not really on the DoD’s radar, at least when it comes to revoking a security clearance.


Similar to substance abuse and several other personal conduct areas, the DoD is concerned that persons with financial problems may be pressured to take illegal actions, such as selling secrets, to raise funds. The specific concerns include:

  • – History of Unmet Obligations: This factor is not present in many consumer bankruptcies, and even if there is a history of unmet obligations, the reason is usually one unfortunate event, like a job loss, which triggered a snowball effect.
  • – Illegal Practices: In almost all Chapter 7 and Chapter 13 cases, the debtor files due to debts that cannot be paid as opposed to “embezzlement, employee theft, check fraud, income tax evasion, expense account fraud, filing deceptive loan statements” or “gambling, drug abuse, [and] alcoholism, so this concern is probably inapplicable as well.
  • – Inability to Pay Debts: Yes, this one probably applies, but so do many of the mitigating factors discussed below.

Essentially, the DoD is concerned about debt that is symptomatic of a more serious problem as opposed to simply debt itself.

Mitigating Factors

That theme of debt with a sinister undercurrent continues in the mitigating factors section, as the DoD strongly implies that the “honest but unfortunate” debtor whom the Bankruptcy Code protects is also immune from action under this directive.

  • – Timing: If the debt was “not recent” or was an “isolated incident,” the DoD almost never takes adverse action against a security clearance.
  • – Unexpected: Most people file bankruptcy because of an unexpected job loss or sudden illness. Likewise, debt problems brought on by “loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation” are not actionable.
  • – Turn of Events: If there are “clear indications” that the “problem is being resolved,” and a voluntary petition certainly counts as such, adverse action is not in order.
  • – Effort to Resolve Indebtedness: The guideline does not require the debtor to pay the outstanding debts but simply “resolve” them in some legal way so they they do not cause any undue pressure.

It is a federal crime to discriminate against anyone simply due to a bankruptcy filing.

Contact Aggressive Attorneys

At the Bentz Holguin Law Firm, LLC, we protect your security clearance. Contact us today for a free consultation with an experienced bankruptcy attorney in Chicago.