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Can You Have A Security Clearance With Bankruptcy?


The defense budget is the largest component of the federal budget. Much of this money goes to private security contractors. A high security clearance is usually a basic job requirement for these positions. Quite understandably, distressed debtors who rely on their security clearances are very hesitant to take any action that could threaten it. Guideline F of DoD Directive 5220.6 addresses debt matters and allows the DoD to take adverse action against distressed debtors.

But, you can have a security clearance with bankruptcy. In fact, filing bankruptcy, especially Chapter 13 bankruptcy, may be the best way for distressed debtors to avoid adverse security clearance action. Bankruptcy has many other benefits as well. It stops repossession, foreclosure, and other such adverse actions. Furthermore, bankruptcy protects your house, car, retirement account, and other core assets from creditor seizure. Finally, and perhaps most importantly, bankruptcy means a fresh financial start for you and your family.

Financial Concerns in Guideline F

Over the years, countless individuals have resisted the urge to sell restricted information and raise money, even in the face of crushing debt problems. A few people have given into temptation under such circumstances. So, if you have, or apply for, a security clearance, and you have debt problems, you are on the DoD’s radar. Specific concerns include:

  • A recent history of multiple unmet obligations,
  • Prior “embezzlement, employee theft, check fraud, income tax evasion, expense account fraud, filing deceptive loan statements, and other intentional financial breaches of trust,”
  • Money problems that are connected to “gambling, drug abuse, alcoholism, or other issues of security concern,” and
  • Unwillingness to pay debts.

Almost none of these concerns apply to debtors who file bankruptcy, especially Chapter 13 bankruptcy.

Medical bills, divorce, and other such circumstances force debtors into bankruptcy. Almost no one files bankruptcy because of intentional trust breaches. These debts usually aren’t dischargeable anyway. Furthermore, when debtors file Chapter 13, they basically say “I want to pay my debts, but I can’t pay them all at once, so I need a payment plan.” In other words, they aren’t unwilling to pay them.

Mitigating Circumstances in Guideline F

In contrast, the mitigating circumstances in Guideline F jive very closely with Chapter 13 bankruptcy. Some examples include:

  • Uncontrollable circumstances, such as “loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation,” triggered the financial problems,
  • “The person has received or is receiving counseling for the problem and there are clear indications that the problem is being resolved or is under control,” and
  • “The individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts.”

As mentioned, unpredictable financial storms prompt most people to file bankruptcy. Furthermore, all bankruptcy debtors must take a pre-filing debt counseling course. Finally, as mentioned, Chapter 13 represents a good-faith effort to repay and resolve overdue debts.

Additionally, if the DoD attempts adverse action, a Chicago bankruptcy lawyer stands up for you during the hearing.

Reach Out to a Tough Cook County Lawyer

No matter what kind of financial problem you are having, bankruptcy could be a way out. For a free consultation with an experienced Chicago bankruptcy attorney, contact the Bentz Holguin Law Firm, LLC. Virtual, home, and after-hours visits are available.



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