How Will Filing For Bankruptcy Affect My Security Clearance?

27August
2012

Many of our clients are active duty military or government employees or employees that work for defense contractors. As a result, many of these prospective clients will have either secret or top secret security clearances which are required for their jobs. A common question we get asked is “how will filing for bankruptcy affect my security clearance?” My previous blog posts dated July 16, 2012 and August 6, 2012 discuss security clearance matters in general. DOD (Department of Defense) Directive 5220.6 covers all matters regarding security clearances for the government. For clients that have debts and debt problems, Guideline F is the applicable provision regarding financial affairs to determine whether there will be a potential problem. Paragraph 20 of Guideline F in the DOD Directive sets forth circumstances that mitigate security concerns. Paragraph 20(d) states that “the individual initiated a good-faith effort to repay creditors or otherwise resolve debts.” That paragraph covers the filing of either a chapter 7 or a chapter 13 bankruptcy. Additionally, Paragraph 20(b) of the Directive can be used to explain how a person got into a financial fix prior to the bankruptcy having been filed. As a general proposition, and in our experience, we have seen that one bankruptcy in a lifetime will not cause any security clearance issues. If, however, there are other issues, then that could be problematic. For instance, we have seen situations where two bankruptcy filings fifteen years apart were enough to revoke a clearance. Additionally, a bankruptcy filing with a criminal conviction (DUI, domestic abuse, etc.) may also cause a clearance to be revoked. The government usually tries to add a charge to any security case under Guideline E which deals with personal conduct. The easiest way for this charge to be alleged under Guideline E is for lack of candor in the applicant’s answer to the SF86 Form, which is the government form completed under oath in order to get a clearance. It covers an individual’s entire background, including financial history. With regard to the financial questions, applicants are asked if they have ever been sued, if they have ever had a judgment against them, if they have ever been delinquent more than 60 days, 90 days, and 120 days with any debts, etc. With those types of questions, applicants invariably and mistakenly get tripped up and an incorrect answer can be used against them.

In most circumstances, filing for bankruptcy should not be a security problem to address debts if finances have not been a recurrent, lifelong problem. Prior to submitting an initial security clearance application, or in anticipation of a renewal for a clearance, we always advise clients to get their free credit reports from www.annualcreditreport.com. Review the credit reports and see exactly what is out there. If there are delinquent debts out there, please seek advice on how to address them. My previous blog posts discuss in more detail the actual security clearance application process. Additionally, our website also sets forth exactly how you can get your true, free credit reports from www.annualcreditreport.com. Finally, if you do have a security clearance and you file for bankruptcy, we advise clients to notify their facility security officer (FSO) of the bankruptcy filing. In most circumstances, the FSO will simply want a copy of the petition. Again, complete candor in all matters dealing with your security clearance is the absolute best way to protect your clearance.

I have handled security clearance revocation matters for several years. If you have a problem, please feel free to contact me by email or by calling me at 256-539-9899.

Posted in Bankruptcy, Security Clearance |