Many people who need to file bankruptcy hesitate to do so because they are afraid that a voluntary petition will mean the revocation of their security clearances. That fear is only partially true. Although the word “bankruptcy” does not appear in Department of Defense Directive 5220.6, which controls security clearance revocation, there is a section devoted to “financial considerations.”

As a general rule, money problems never get better by themselves, and without corrective action, they nearly always get worse. Bankruptcy can be such a corrective action, albeit not the one that moneylenders prefer consumers to use. So, in many ways, bankruptcy may save a security clearance rather than threaten it.


Financial problems are only one area that may trigger adverse action against a security clearance. Some of the others include foreign preference and sexual behavior. In fact, the DoD considers both these things to be more of a threat than financial problems. Nothing is automatic. A brother-in-law in the Mexican Consulate’s office in Chicago is not a per se foreign preference and infidelity to one’s spouse is not a disqualifying sexual behavior issue. Everything is subject to a balancing test.

Before anyone can take action against a security clearance, there must be notice and hearing. At such a hearing, the holder may present evidence of mitigating circumstances and advance other arguments in favor of keeping the clearance at its current level.

Financial Concerns

In Guideline F, the DoD lays out several valid concerns in this area; specifically, persons with unpaid debts are sometimes tempted to engage in illegal activity, such as selling secrets, to raise funds. Some warning signs include:

  • – History of Unmet Obligations: Most people file bankruptcy because of a sudden financial emergency, such as large medical bills, as opposed to a consistent pattern of not paying bills.
  • – Fraud: This concern does not apply to bankruptcy either, since only a miniscule number of debtors have issues with embezzlement, tax evasion, and “other intentional financial breaches of trust.”
  • – “Inability or Unwillingness” To Pay Debts: Looking at the entirety of this section, this phrase implies an unwillingness to pay debts because the debtor has wasted money in other areas, and that is usually not the case with consumer bankruptcies.

The directive clearly states that such circumstances, if they exist, “may be disqualifying,” which is not the same thing as are disqualifying.

While the concerns have little to do with bankruptcy, the mitigating circumstances have everything to do with bankruptcy.

  • – Isolated Incident: Most people file bankruptcy because of isolated incidents that spill over into other areas as well.
  • – Lack of Control: In most cases, people have almost no control over divorce, business downturn, job loss, or illness.
  • – Improvement: People take control of their financial situations by filing bankruptcy and they also obtain debt counselling. These are two of the mitigating factors in E2.A6.1.3.4.
  • – Resolution: In most cases, a voluntary petition is a “good-faith effort to repay overdue creditors or otherwise resolve debts.”

Bankruptcy shows that debtors did whatever possible to minimize the damage that unpaid bills can cause; on the other hand, repossession, foreclosure, and collections referrals are all evidence that the consumer simply quit.

Contact Aggressive Lawyers

To protect your security clearance and claim your fresh start, contact an experienced bankruptcy lawyer in Chicago from the Bentz Holguin Law Firm, LLC for a free consultation. After hours appointments are available.