In general, filing for bankruptcy relief will not automatically prohibit you from obtaining a security clearance. But being financially irresponsible can jeopardize your security clearance. This means that whether your bankruptcy will affect your security clearance typically depends on the circumstances that led you to file for bankruptcy. Read on to learn more about whether filing for bankruptcy will affect your security clearance. (For more information on what to consider before filing for bankruptcy, see our topic area on Bankruptcy Filing Considerations.)
Guidelines for Security Clearance Determinations
In general, security clearance decisions are made on a case by case basis and take into account certain factors and guidelines designed to assess your security risk based on your:
- allegiance to the United States
- foreign influences and preferences
- sexual behavior
- personal conduct
- financial responsibility
- drug or alcohol use
- psychological disorders
- criminal conduct
- handling of protected or classified information
- use of information technology, and
- other outside activities.
Financial Considerations That Affect Security Clearance Decisions
When determining whether you should be granted a security clearance, one of the factors the military considers is whether you are a financially responsible individual. The reasoning behind this consideration is that if you can’t live within your means or satisfy your debts, you may be a security concern because you might lack self-control, have poor judgment, or be more willing to commit illegal acts to satisfy your financial obligations.
The following are some of the most common financial conditions that can disqualify you from obtaining a security clearance:
- not being able (or willing) to pay your debts
- irresponsible and frivolous spending habits
- consistently having difficulty meeting your financial obligations
- committing illegal acts such as embezzlement, theft, tax evasion, or other types of financial misconduct
- having financial problems as a result of gambling, alcoholism, or drug abuse
- failuing to file timely income tax returns, or
- maintaining an expensive lifestyle or standard of living that is inconsistent with the amount of legal income you have.
Will Filing for Bankruptcy Affect Your Security Clearance?
Filing for bankruptcy relief will not automatically prohibit you from obtaining a security clearance. In general, whether your bankruptcy will affect your security clearance depends on the circumstances that led you to file.
If you experienced financial problems and had to file for bankruptcy because of an unexpected event (such as job loss, divorce, or a medical emergency), your bankruptcy will be viewed more favorably than if you had to file because of excessive spending or other financial irresponsibility.
But as we discussed, having a large amount of outstanding debts can jeopardize your ability to obtain a security clearance even if you don’t file for bankruptcy. This means that in some cases, filing for bankruptcy may help you eliminate your debts, show that you are taking a positive step towards resolving your financial problems, and make you a better candidate for a security clearance.
Get More Information
Whether a bankruptcy filing will jeopardize your security clearance depends on numerous factors and your individual circumstances. Talk to a knowledgeable bankruptcy attorney or the appropriate legal office or authority in your branch of the military prior to filing your case to learn more about whether bankruptcy will affect your security clearance.