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Could I lose my security clearance if I file for bankruptcy?

Financial stability often plays a factor in whether someone can receive a government security clearance. The general reasoning is because the government believes that people suffering from financial problems could be more susceptible to bribes, financial influence and other forms of manipulation.

Considering this, you might wonder if filing for bankruptcy -- whether it's Chapter 7 or 13 -- could affect the security clearance you currently hold.

What factors are considered in a security clearance investigation?

The Department of Defense investigates security clearances. When carrying out these investigations, they will look at a variety of areas of life -- financial issues being an area that carries a fair amount of weight in the investigation. Here are a few things the DoD looks at in this regard:

  • Do you pay your bills on time?
  • Are you unable and/or unwilling to pay your bills on time?
  • What are your spending habits? Do you live beyond your financial means?
  • How do you earn your money?
  • Is gambling a problem? Do you have a drug or alcohol addiction that might cause financial problems, or cause you to be a target for blackmail?
  • Have you committed illegal actions related to money, like tax evasion, fraud, theft or embezzlement?
  • What's the status of your tax payments and tax filings?

Filing for bankruptcy could actually help your security clearance

The fact is, bankruptcy is a debt solution and the DoD may view your filing for bankruptcy as a responsible act toward resolving any financial issues you've been suffering from. One way of looking at a bankruptcy is that it's an indicator that someone is on a sound path toward a better financial future. In this respect, filing for bankruptcy might actually assist someone in obtaining and maintaining a security clearance -- or at least cause the DoD to view him or her in a better light.

There have been cited examples of individuals who were seeking a security clearance, and qualified because they filed for bankruptcy -- because the bankruptcy showed that they had taken practical steps to get their financial situation under control.

    Are you trying to get a security clearance but you have financial problems? The more you know about what's required to qualify for your security clearance, and the more you know about bankruptcy law and how it could affect you, the better you'll be at navigating this important legal issue.

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