Do I Lose My Security Clearance if I File Bankruptcy?
For many people who work at or support Grissom ARB, Camp Atterbury, and other military installations, this question is often critical. The benefits of bankruptcy are difficult to ignore, but if these benefits essentially cost debtors their careers, bankruptcy might not be worth it. A little-known order first published in the 1990s, DoD Directive 5220.06, provides the rules in this area. And, these rules are quite debtor-friendly.
The benefits of bankruptcy include the Automatic Stay, debt repayment in a Chapter 13, and debt discharge in a Chapter 7. The Automatic Stay prohibits all forms of creditor adverse action, from harassing letters to home foreclosure. Chapter 13 debtors have up to five years to catch up on secured obligations, and Chapter 7 quickly erases credit cards and other unsecured debts.
Although the rules are relatively clear, it’s rather common for the DoD or another agency to try and revoke security clearance because of a bankruptcy filing. That’s when you need an experienced Chicago bankruptcy lawyer in your corner. Only a good attorney can stand up for your rights in court.
The Connection Between Financial Problems and Security Clearances
Money problems, and the stress they create, affect our lives in many different ways. So, the DoD is properly concerned about financial issues.
Financial stress is often quite significant. For example, about a third of Millennials say they are unable to focus on their jobs because of money problems. These individuals are more prone to make mistakes. And, where a security clearance is an issue, these mistakes could be costly indeed.
Additionally, according to Guideline F of Directive 5220.06, people who owe large amounts of money often resort to illegal activity, including selling secrets, in order to raise funds. That concern might be a bit far-fetched. But these things have happened before and they will happen again.
Specific Concerns
So much for the general concerns. As for the specific concerns, they often have little or nothing to do with a consumer bankruptcy.
- History of Unmet Obligations: Most people file bankruptcy because of medical bills, job loss, or another one-time financial storm. Some people have a long history of overspending and unmet obligations, but these filings are not very common.
- Deceptive or Illegal Practices: Almost no bankruptcy filings have any relationship to “embezzlement, employee theft, check fraud, income tax evasion, expense account fraud, filing deceptive loan statements, and other intentional financial breaches of trust.” Bankruptcy’s benefits are unavailable in such situations, so these people gain nothing by filing voluntary petitions.
- Links to Other Security Concerns: Frequently, money problems do not occur in a vacuum. Instead, they are connected to “gambling, drug abuse, alcoholism, or other issues of security concern.” However, as mentioned, most people file bankruptcy because of a financial storm.
If the DoD or another body tries to revoke a security clearance, they must typically base this action on one of the aforementioned security concerns. These concerns might apply to people facing financial problems in general, but they almost never apply to bankruptcy debtors in particular.
Mitigating Circumstances
The listed mitigating circumstances, on the other hand, often have everything to do with consumer bankruptcy.
- Not Recent: Bankruptcy is a last resort for most people. They often wait several months, or even several years, after financial problems set in before they consult a Chicago bankruptcy lawyer.
- Isolated Incident: The financial storm analysis applies here as well. Events like serious illnesses and business downturns are typically more than once-in-a-lifetime occurrences. But they are by no means commonplace.
- Lack of Control: People have little or no control over these financial storms. They normally just happen. In fact, the listed examples in Guideline F (“loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation”) practically mirror the most common bankruptcy filing reasons.
- Good Faith Effort to Resolve Debts: Ultimately, many people file bankruptcy to take control of their financial situations. Bankruptcy is federally-sanctioned for this purpose. So, even if none of the other mitigating circumstances apply, this one almost always does.
Essentially, there is a presumption that a bankruptcy debtor was honest, but unfortunate. Misfortune alone does not justify adverse action in the security clearance context.
Reach Out to Effective Lawyers
Bankruptcy generally does not affect security clearances. For a free consultation with an experienced Chicago bankruptcy attorney, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.
https://bentzholguinlaw.com/can-bankruptcy-stop-irs-debt/
