Will I Lose My Security Clearance if I File Bankruptcy?

04 Jul Will I Lose My Security Clearance if I File Bankruptcy?


Source: Wikipedia Commons

I practice in the Washington, DC area. Lots of my clients work for federal agencies and contractors who require security clearances as a condition of their employment. The first question they ask when they come to see me is whether a bankruptcy filing will cause them problems with their security clearance. The short answer I give: No, it likely will not.

This causes surprise, in large measure because of the urban legends about bankruptcy that just aren’t true. But why won’t bankruptcy have a negative impact on a security clearance? The reason is simply that bankruptcy makes you less of a security risk.

What makes someone a security risk? According to the Department of Defense, “The purpose of a security clearance is to determine whether a person is able and willing to safeguard classified national security information, based on his or her loyalty, character, trustworthiness, and reliability.” “All available, reliable information about the person, past and present, favorable and unfavorable, is considered in reaching a clearance determination. When an individual’s life history shows evidence of unreliability or untrustworthiness, questions arise whether the individual can be relied on and trusted to exercise the responsibility necessary for working in a secure environment where protection of classified information is paramount.”

Under this standard, it is not the bankruptcy itself that potentially could cause a problem, but the reason the┬áperson files for bankruptcy. For example, if you run a Ponzi scheme, or if you defraud people, or if you committed criminal acts, and file bankruptcy as a result, this could be a problem. But if your or a family member’s illness caused financial problems, or if you were out of work or had your wages cut, or if you got divorced (events that cover almost 90% of all consumer bankruptcies), these don’t impact your reliability or trustworthiness and a bankruptcy that results won’t impact your clearance.

I have represented people who work at DOD, DIA, CIA, NSA and the White House, as well as every branch of the military. I have represented people with every possible security clearance, from Confidential to Top Secret (and the other clearances that have only letters and numbers describing them). NOT ONE has told me that a bankruptcy filing had any impact whatsoever on their security clearance, their job, or their advancement. I have even had clients tell me that their security officer told them that they needed to file for bankruptcy or they would lose (or not get) their clearance! The only requirement is that you tell your security officer before you file so that they know you are not trying to hide anything. They already know that you’re in financial difficulty–bankruptcy shows that you’re addressing the problem and fixing it.

And this makes sense. Bankruptcy allows you to deal with your debt. It allows you to eliminate it, restructure it, and pay it. It enhances your reliability and trustworthiness and makes you less of a risk that someone will offer to take care of your financial problems in exchange for your password.

So if you are worried that you’ll lose (or not get) your security clearance if you file bankruptcy, don’t. It should actually help.

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Brett Weiss, a senior partner at The Weiss Law Group, LLC, represents people and businesses in all phases of bankruptcy. He has experience in complex individual Chapter 7, Chapter 11, and Chapter 13 bankruptcy cases, and in Chapter 11 small business restructuring and reorganization. Mr. Weiss lectures nationally on bankruptcy issues. He has testified before the Federal Bankruptcy Rules Committee, the Consumer Financial Protection Bureau, and has twice testified before Congress on bankruptcy and credit issues. Brett Weiss is the co-author of Chapter 11 for Individual Debtors, and has written Not Dead Yet: Bankruptcy After BAPCPA, for the Maryland Bar Journal, as well as hundreds of blogs for the Bankruptcy Law Network. With his colleague, Daniel Press, he recorded a 13-hour basic bankruptcy training series, and leads intensive three-day Chapter 11 training boot camps. Mr. Weiss has received international media attention in connection with his work. He was interviewed by Barbara Walters on The View, has appeared on the Today Show, Good Morning America, ABC News with Peter Jennings, the Montel Williams Show, National Public Radio, AARP-TV, the BBC World Service, German state television, and numerous local radio and television programs, and been quoted in Money magazine, The Washington Post and The Baltimore Sun, among others. Brett Weiss is the previous Maryland State Chair for the National Association of Consumer Bankruptcy Attorneys, a founding member of the Bankruptcy Law Network, on the board of the Maryland State Bar Consumer Bankruptcy Council, and a member of the American Bankruptcy Institute and the Bankruptcy Bar Association of Maryland. He has received the Distinguished Service Award from the National Association of Consumer Bankruptcy Attorneys for his work on behalf of consumers across the country. Mr. Weiss is admitted to practice before Maryland and District of Columbia federal and state courts, the United States Courts of Appeals for the DC, Fourth and Eighth Circuits, the United States Tax Court, and the Supreme Court of the United States, and has been practicing law since 1983.
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