Security clearances are fact of life for many of my clients. Perhaps they work for the government, are in the armed forces, or work for a contractor that does sensitive work that requires a clean background and security clearance. I have helped many federal employees, defense or other government contractors, members of the armed services and National Guard, and others for whom security clearances are an essential fact of their jobs. These clearances serve an ostensibly important purpose to protect our national security from bad actors. The general idea, of course, is to exclude people who may pose a risk to national security from having access to sensitive or otherwise classified information from top military secrets to sensitive financial information. Qualifications for these security clearances are generally determined by reference to “Guidelines”. For purposes of this article, we will focus on the federal guidelines (see 32 C.F.R. Part 147). In order to determine fitness for security clearance, the Guidelines look to factors like allegiance to the United States, foreign influence, foreign preference, sexual behavior, personal conduct, drug and alcohol consumption, personal conduct, past conduct (criminal, security, and misuse violations), and financial considerations. The very last consideration is where we will focus our attention.
Let’s take a deeper look at how financial consideration impact security clearance determinations. Look specifically at 32 C.F.R. Part 147, Guideline F: 147.8 – “Financial Considerations”. The concern raised in the Guidelines is whether financial difficulty and overextension poses a risk of illegal or unethical activity to generate funds to satisfy debts. The conditions that raise the concern are a failure to pay debts or an inability or unwillingness to satisfy debts. Conversely, there are considerations that mitigate the concern too. For example, whether the incident was isolated or outside your control (like divorce, death or medical issues), whether you have sought counselling for the problem or otherwise have it under control, and what good faith efforts you have made to either resolve or repay the debts that gave rise to the concern. This is where bankruptcy protections rides in and saves the day – by resolving the debt issues in a good faith manner and alleviating the stress that gives rise to concern that you may become a bad actor if given security clearance.
Bankruptcy can definitely help. I consistently advise folks who have security clearance concerns to consider all of their options. I further advise that when all else fails, the mountain in front of them is simply too high to climb, and their clearances may be impacted or otherwise at risk, bankruptcy will be a great option to save the day. Bankruptcy protection is designed to help the honest but unfortunate debtors when tragic or unexpected life events occur (e.g. death, divorce, medical bills, plain bad luck, or prior poor financial decisions). It is a right available to everyone under Federal law. Further, credit counselling is required of every single debtor who files a bankruptcy petition and the Bankruptcy Code requires that every petition filed be filed in “good faith”. By filing a bankruptcy petition, you are acknowledging the problem your debts are posing and taking proactive and positive steps to resolve those debts by availing yourself of a right that you have under federal law. By availing yourself of bankruptcy protection, you are deleveraging yourself and improving your financial conditions while eliminating the stress of creditor collection activities. While Bankruptcy is an excellent option for resolving debts that may threaten your security clearances, there are also several important considerations throughout the process.
The first important consideration is that the guidelines do not specifically reference bankruptcy positively or negatively as a choice of resolution. Bankruptcy does meet many of the mitigation criteria like good faith, counselling, taking control, accepting responsibility, and resolving your debts. A second important consideration is which chapter of bankruptcy to file. Chapter 7 is quick and you discharge all of your unsecured debts rather quickly, whereas Chapter 13 is a repayment plan based on your disposable income over a three to five year period according to what the Bankruptcy Code requires. Again, the Guidelines do not specifically reference bankruptcy as a vehicle for debt resolution, so it is very important to discuss your situation with a qualified bankruptcy attorney. The third important consideration is honesty. Bankruptcy is a fantastic way to meet many of the mitigation criteria and, if you choose to file, you must be completely and totally honest about all your debts and property. I consistently advise my clearance-seeking clients that when they file, they should also apprise their commanding officer or superior in charge of their clearances that they have taken the reigns and filed for bankruptcy. As a bankruptcy attorney, I am always prepared to answer questions from these superiors and provide copies of the filed documents.
In conclusion, if your debts are threatening your security clearances now or they may threaten those clearances in the future, you should strongly consider all of your options. Consult with a qualified bankruptcy attorney as a part of those considerations and take back control of your financial life by obtaining the fresh start that bankruptcy offers as a right under federal law. The experienced, proven, and trusted bankruptcy attorneys at Mooney Law stand ready to assist you and answer your questions. Consultations for bankruptcy are always free at Mooney Law. To schedule a FREE consultation, call us today at 833-MOONEYLAW or at 717-200-HELP. You can also visit the firm website at https://www.mooney4law.com.
