Will Bankruptcy Affect My Military Security Clearance?

Filing for bankruptcy relief will not automatically prohibit you from obtaining a security clearance. But whether you have a history of financial irresponsibility will be considered during the evaluation process. As a result, whether your bankruptcy will affect your security clearance typically will depend 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 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 specific factors and guidelines designed to assess your security risk. For example, you can expect the evaluation to consider 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.

Will Filing for Bankruptcy Affect Your Security Clearance?

Filing for bankruptcy relief will not automatically prohibit you from obtaining a security clearance. In fact, getting rid of debt in a Chapter 7 case could increase your chances of approval. Not only will filing show that you are taking a positive step towards resolving your financial problems, but debt-free people have less incentive to accept a bribe or commit some other illegal act, thereby becoming a better candidate for a security clearance.

Even so, filing for bankruptcy isn't a guaranteed fix. Whether your bankruptcy will affect your security clearance will depend on the circumstances that led you to file.

If, for instance, 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 another type of financial irresponsibility.

(If you're not sure which chapter to file, you'll want to learn about the differences between Chapter 7 and 13 bankruptcy.)

Financial Considerations That Affect Security Clearance Decisions

When the military evaluates whether you should receive a security clearance, one of the factors considered is whether you're a financially responsible individual. The reasoning behind this consideration is that if you can't live within your means or satisfy your debts, you might be a security concern due to lack of self-control—or you might have poor judgment or be predisposed to commit illegal acts to meet your financial obligations.

Here are some examples 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
• failing 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.

(Find out the average cost of filing for Chapter 7 bankruptcy.)

Get More Information

Whether a bankruptcy filing will jeopardize your security clearance depends on numerous factors and your circumstances. Talk to a knowledgeable bankruptcy attorney or the appropriate legal office or authority in your branch of the military before filing your case to learn more about whether bankruptcy will affect your security clearance.