I'm a U.S. permanent resident, who got laid off from my job two years ago. I kept using my credit cards to pay my family's rent and other expenses, hoping I would find a job to pay it all off. But the payments got to be too high. So now I am in bankruptcy. Can I still become a U.S. citizen, or will the immigration people think I'm a loser?
The real question isn't whether you're a "loser." If you are, millions of U.S. citizens also are, especially with so many having lost jobs or sources of income since the coronavirus (COVID-19) pandemic began.
The question is whether you have the "good moral character" required to become a naturalized U.S. citizen. Financial problems alone are not a bar to this finding of good moral character.
What is "good moral character?" U.S. immigration law actually says more about what is isn't than what it is. U.S. immigration law sets out some automatic bars to a finding of good moral character, such as commission of certain crimes (but not debt, unemployment, or bankruptcy).
There's also guidance to be found in the USCIS Policy Manual (Part F), which describes good moral character as that which "measures up to the standards of average citizens of the community in which the applicant resides."
In addition, U.S. Citizenship and Immigration Services (USCIS) has set forth various automatic bars, such as failure to pay taxes. The Form N-400 Application for Naturalization specifically asks about taxes, but it doesn't ask about debt, foreclosure, bankruptcy, or related financial issues.
You didn't mention whether tax debt was an issue in your case, but you can expect to have to pay any federal, state, or local taxes that you owe, plus penalties, before you are approved for citizenship. In the alternative, USCIS may accept proof that you are cooperating with an IRS payment agreement.
Beyond the automatic bars, a finding of good moral character is largely up to the subjective determination of the USCIS officer deciding your case. Applicants need not be more upstanding than average citizens in the community where they live, but as mentioned above, they must at least meet the same standard.
The officer's discretion must nevertheless be exercised reasonably. For example, at one time, some USCIS officers routinely denied citizenship to people who were receiving public assistance, until attorneys and immigration advocates protested. They leaned on USCIS to acknowledge that lawful receipt of benefits (with no fraud involved) says nothing negative about a person's morality.
It will also be interesting to see if and whether a recent USCIS focus on receipt of public benefits and credit history in the context of applying for a green card (under 2020 "public charge" regulations that make it harder for applicants to overcome a finding of inadmissibility) will carry over to the naturalization context.
Of course, if you have engaged in unlawful behavior stemming from your financial trouble, such as committing fraud in order to claim public assistance, or failed to pay child support, this will be factored into the decision of whether you have sufficiently good moral character to become a U.S. citizen. In such a case, you would want to consult an attorney before applying. Illegal behavior can result not only in a denial of citizenship, but in deportation (removal) from the United States.