How Can Bankruptcy Protect My Security Clearance?
Bankruptcy protects visible assets, like your house, and invisible assets, like your security clearance. Yes, pursuant to DoD Directive 5220.6, financial problems could trigger adverse action against a security clearance, such as denial or refusal to renew. However, as outlined below, there is a big difference between filing bankruptcy and financial concerns.
In general, it is illegal to take any adverse actions against people simply because they file bankruptcy. A Chicago bankruptcy lawyer advocates for debtors in these situations. So, if a public or private employer tries to use your bankruptcy to take away your security clearance, an attorney knows how to prevent that from happening.
Financial Concerns
Many people will do almost anything for love or money. That includes selling secrets, or at least turning the other way and allowing other people to sell them. So, the DoD is right to be concerned about such situations. However, financial concerns are rather low on the priority list of dangerous situations. Furthermore, the specific concerns usually do not apply in consumer bankruptcies.
- Illegal or Deceptive Practices: Almost no one files bankruptcy because of “embezzlement, employee theft, check fraud, income tax evasion, expense account fraud, filing deceptive loan statements, and other intentional financial breaches of trust.” Bankruptcy laws, like the Automatic Stay, normally do not help these individuals.
- History of Unmet Obligations: Most people who file bankruptcy were unable to deal with an unexpected financial storm. Typically, that storm was at least mostly beyond their control.
- Linked Financial Concerns: The DoD considers the debtor’s financial problems much more seriously if they are connected to “ gambling, drug abuse, alcoholism, or other issues of security concern.” Once again, these matters are rare in bankruptcy proceedings.
In contrast, as outlined below, the mitigating circumstances usually coincide with bankruptcy filings.
Mitigating Circumstances
The aforementioned circumstances usually apply to people who are in extremely dire financial straits, face violent illegal collection activities, and have done little or nothing to address their debts. Bankruptcy gives people control over their own financial situations. That control is what the DoD wants to see.
- Lack of Control: The listed examples, which are “loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation,” practically mirror the reasons people file bankruptcy. In other words, a Chapter 7 is inherently a mitigating circumstance.
- Good Faith Effort to Resolve Debts: This mitigating circumstance is especially prevalent in Chapter 13 filings. These individuals essentially state that they can afford to pay their debts, they just need more time to do so.
- Counselling and Control: All bankruptcy filers must successfully complete a debt counselling course and a credit management course. And, in terms of control, bankruptcy is a good alternative to foreclosure, repossession, and other situations which indicate that the debtor quit.
In a nutshell, Chapter 13 gives distressed debtors up to five years to repay secured debt delinquency based on their current incomes. Chapter 7 discharges most unsecured debts in only a few months.
Reach Out to Dedicated Lawyers
A bankruptcy filing might be the best way, or the only way, to preserve your security clearance. For a free consultation with an experienced bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Convenient payment plans are available.
Resource:
esd.whs.mil/Portals/54/Documents/DD/issuances/dodd/522006p.pdf?ver=2019-04-03-105534-323
