Will I Lose My Security Clearance if I File Chapter 13 Bankruptcy?
No. And, in fact, according to Guideline F in DoD Directive 5220.06, which is the authoritative document in this area, filing bankruptcy might be the only way to save a security clearance.
Chapter 13 affects a debtor’s life in many ways. This filing usually triggers five years of court supervision. Furthermore, filing bankruptcy lowers a credit score. Most other effects are positive. Chapter 13 includes asset protections that are unavailable elsewhere. Furthermore, Chapter 13’s Automatic Stay instantly stops repossession, wage garnishment, foreclosure, and most other adverse creditor actions.
A Chicago bankruptcy lawyer protects your security clearance, and other important financial assets.
Additionally, in the unlikely event that things go sideways, the DoD must give individuals notice and an opportunity to be heard before it takes any adverse security clearance action. Attorneys stand up for security clearance holders at this hearing. Lawyers usually resolve these disputes out of court, and on debtor-friendly terms.
Financial problems, even severe financial difficulties, very rarely prompt people to sell sensitive information. But such behavior has happened before, and it will happen again. Therefore, the DoD is understandably concerned about:
- Unexplained Financial Windfalls: Most financial problems don’t disappear overnight. These problems are manageable, if debtors change their financial habits. The financial discipline that a Chapter 13 imposes is a good example.
- History of Unmet Obligations: Almost anything can happen once, or even twice. But a pattern of unmet financial obligations is disturbing, especially if the debtor basically ignores them.
- Financial Problems and Unethical Conduct: If, according to the DoD, “embezzlement, employee theft, check fraud, income tax evasion, expense account fraud, filing deceptive loan statements, and other intentional financial breaches of trust” caused the financial problems, the debtor is more likely to sell secrets.
Most bankruptcy debtors don’t fit this profile. In fact, a Chicago bankruptcy lawyer often doesn’t take cases related to unethical conduct. These debts are usually nondischargeable.
“Discharge” means the judge wipes away the legal obligation to repay a debt. Medical bills, credit cards, and most other unsecured debts are dischargeable in a Chapter 13.
The areas of concern usually don’t apply to bankruptcy filers. The mitigating circumstances are a much different story.
- No Recent Problems: Bankruptcy is generally a last resort for most people. They usually try non-bankruptcy debt negotiations and other tactics first. Therefore, by the time they file, they’re still feeling the effects of the debt, but the debt itself was not “recent.”
- Lack of Control: The DoD’s examples (loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation) basically mirror the reasons for bankruptcy filing. Chapter 13 puts these debtors back in the driver’s seat.
- Reform: Bankruptcy definitely is “a good-faith effort to repay overdue creditors or otherwise resolve debts.” Once the debtor takes control of the situation, the DoD’s concerns basically vanish.
The same analysis applies to Chapter 7 bankruptcy. Most people with high unsecured debts file Chapter 7. Usually, Chapter 13 helps people with past-due secured debts, like overdue mortgage payments.
Count on a Dedicated 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 bankruptcy attorney in Chicago, contact the Bentz Holguin Law Firm, LLC. Virtual, home, and after-hours visits are available.