What Happens To Your Security Clearance If I File Bankruptcy?
From time to time service members and defense contractors come into my office for a consultation. Besides wanting to know how bankruptcy will affect their financial lives, many of them also want to know if filing bankruptcy will cause them to lose their security clearance. As a veteran, I can understand their apprehension about how bankruptcy will affect their military career. The last thing they want is to have it affect their promotion.
If you’ve spent enough time around lawyers, you already know the answer: it depends.
You May Be Able To Keep Your Security Clearance If You File Bankruptcy
Filing bankruptcy does not automatically mean that you’ll lose your security clearance.
According to the United States Air Force Academy’s Legal Office,
The status of your security clearance can be affected, but it is not automatic. The outcome depends on the circumstances that led up to the bankruptcy and a number of other factors, such as your job performance and relationship with your chain of command. The security section will weigh whether the bankruptcy was caused primarily by an unexpected event, such as medical bills following a serious accident, or by financial irresponsibility. The security section may also consider the recommendations and comments of your chain of command and co-workers. This is an issue that can be argued both ways, so as a practical matter your security clearance probably should not be a significant factor in making your decision about whether to file bankruptcy. The amount of your unpaid debts, by itself, may jeopardize your clearance, even if you don’t file bankruptcy. In that sense, not filing for bankruptcy may make you more of a security risk due to the size of your outstanding debts. By the same token, using a government-approved means of dealing with your debts may actually be viewed as an indication of financial responsibility. Eliminating your debts through bankruptcy may make you less of a security risk. There is no hard and fast answer here, with one exception: it never hurts to have a good reputation with your co-workers and your chain of command.
As I advise my clients, whether they’re worried about how bankruptcy may affect their employment or their security clearance, the best course is to be proactive and disclose that they’ve filed bankruptcy. That way they can’t be accused of trying to hide information that might be considered important.
Come In For A Free Consultation To Talk About How Bankruptcy May Affect Your Security Clearance
If you have any questions about how bankruptcy may affect you and what your rights are when you file, we hope you’ll come in for a free, no-obligation consultation with an experienced Denver bankruptcy lawyer. You can schedule an appointment by using our online scheduling system or by calling 303.331.3403.