Do I Lose My Security Clearance If I File Bankruptcy?

Not according to the DoD. This agency can take action against your security clearance if you are experiencing financial problems. But that’s different from filing bankruptcy. In fact, as outlined below, filing bankruptcy might be the only way to cure the financial problems which threaten not only your family, but your security clearance as well.

Bankruptcy has a number of other benefits as well. This federal debt relief program includes an Automatic Stay. Section 362 of the Bankruptcy Code immediately foreclosure, wage garnishment, repossession and other adverse actions. Furthermore, bankruptcy protects your property from creditor seizure. Your assets, like your house and retirement account, could be vulnerable unless you file.

A Chicago bankruptcy lawyer does more than deliver these benefits. Only an attorney can give you solid financial advice about your options. Depending on your circumstances, such as the need to preserve a security clearance, certain kinds of bankruptcy are better than others. Furthermore, a lawyer can unlock some advanced bankruptcy options which could potentially save your family thousands of dollars a year.

Red Flags

Not all financial problems draw DoD scrutiny. But the DoD is rightly concerned that these pressures might prompt people to sell secrets in order to raise money. Some potential troubles include:

• History of Unmet Obligations: Most people file bankruptcy because of a sudden financial storm they cannot handle. That divorce, job loss, or other event might create a snowball financial effect, but that’s not the same thing as repeatedly ignoring financial obligations because you don’t want to pay them.
• Illegal Practices: Almost no one files bankruptcy because of “ embezzlement, employee theft, check fraud, income tax evasion, expense account fraud, filing deceptive loan statements, and other intentional financial breaches of trust.” Only honest yet unfortunate debtors file bankruptcy.
• Linked to Other Issues: The DoD is not just worried about money problems. It’s also worried about issues like “gambling, drug abuse, [and] alcoholism.” Occasionally, these bad habits force people into bankruptcy. But such filings are extremely rare.

Mitigating Factors

The security clearance red flags usually have nothing to do with bankruptcy. The possibly mitigating circumstances, however, often have everything to do with bankruptcy.

• Lack of Control: Guideline F lists “loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation.” This list almost mirrors the lists of the reasons people file bankruptcy.
• Clear Indications of a Resolution: If you file bankruptcy, at least you are doing something about your financial problems. Entries like the aforementioned repossession and foreclosure indicate that the debtor is ignoring the problem. The DoD doesn’t like that approach.
• Good Faith Effort to Cure the Problem: The DoD looks kindly on people who make an effort to get their financial problems under control. Bankruptcy, especially Chapter 13 bankruptcy, represents such an effort.

Financial problems never blindside anyone. Before the DoD or any other agency can take action against your security clearance, there must be notice and hearing.

Count on Compassionate Cook County Lawyers

Filing bankruptcy doesn’t threaten your security clearance. In fact, it might be the only way to save it. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.

Resource:

esd.whs.mil/Portals/54/Documents/DD/issuances/dodd/522006p.pdf?ver=2019-04-03-105534-323