Will Bankruptcy Affect My Military Security Clearance?

Whether filing for bankruptcy will affect your security clearance depends on the circumstances that led to your bankruptcy.

By , Attorney · University of the Pacific McGeorge School of Law

Filing for bankruptcy relief will not automatically prohibit you from obtaining a security clearance. However, the evaluation will consider whether you have a history of financial irresponsibility. As a result, whether bankruptcy will affect your security clearance typically will depend on the circumstances that led you to file for bankruptcy.

Read on for more information about whether filing for bankruptcy will affect your security clearance.

Guidelines for Security Clearance Determinations

Generally, security clearance decisions are made case-by-case and involve specific factors and guidelines to assess your security risk. For example, you can expect the evaluation to consider the following:

  • 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
  • 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 bankruptcy 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.

If you're unsure which chapter to file, you'll want to learn about the differences between Chapter 7 and 13 bankruptcy.

When Might Filing for Bankruptcy Help With a Security Clearance?

Although it can be helpful, 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.

For instance, 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 would be viewed more favorably than if you had to file because of excessive spending or another type of financial irresponsibility.

Financial Considerations Affecting Security Clearance Decisions

When the military evaluates whether you should receive a security clearance, one factor is whether you're financially responsible. 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 a lack of self-control, or you might have poor judgment or be predisposed to commit illegal acts to meet your financial obligations, such as accepting bribes.

Here are some examples of financial conditions that could disqualify you from obtaining a security clearance:

  • not being able to pay your debts
  • irresponsible and frivolous spending habits
  • 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
  • an inability to maintain an expensive lifestyle or standard of living.

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

Consult a Bankruptcy Lawyer

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 military branch before filing your case to learn more about whether bankruptcy will affect your security clearance.

Need More Bankruptcy Help?

Did you know Nolo has made the law easy for over fifty years? It's true, and we want to ensure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!

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Helpful Bankruptcy Sites

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We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.

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