Generally, bankruptcy itself will have not have any impact on your ability to obtain or maintain a security clearance. If you think about it, bankruptcy really should make you less of a security risk.

Filling out the security clearance application form, requires you to fully disclose your financial life in great detail. If you are in financial trouble with your creditors, your application form will reveal it. The question is can you place your troubles in context.

Filing bankruptcy really demonstrates that you are actually dealing with your debts. Bankruptcy can eliminate debts, restructure them, and, under some circumstances, even give you a way to repay see or all of them. Given that a security clearance is really about risk, bankruptcy lowers the risk threshold because it lowers the risk that you’d be tempted to compromise your morals to deal with debts. If you no longer have any debt, there isn’t really any risk of compromise on the table.

The real point of a security clearance is to establish whether a person is capable of protecting classified data. Ultimately this is determined by looking at at the applicant’s life history for evidence of unreliability or untrustworthiness.

If the reasons for filing bankruptcy relate to fraud, criminal behavior, gross irresponsibility, or a consistent lifelong history of financial problems, then these reasons indicate the lack of trustworthiness and reliability, a deficiency of character, and a likely inability to act with loyalty.

So it isn’t bankruptcy itself that can potentially cause a security clearance issues, but the reasons for filing. For example, if you ran a got caught committing fraud and ended up with a ton of debt to your victims forcing you into Chapter 7 or ended owing the government money because you lied on your taxes and had to file Chapter 13, a security clearance might be a real problem. On the other hand, if you had to file bankruptcy because of divorce or illness, your reliability and trustworthiness really aren’t called into question.

The fact is that bankruptcy is almost by definition an appropriate way to resolve debt. The bankruptcy laws are authorized under Article 1, Section 8, Clause 4 of the U.S. Constitution. Bankruptcy is not a legal loophole but a constitutional priority. You may legally discharge debts, restructure them by paying less or changing the payment terms, or to pay certain important debts and pay less or nothing on other debts. All of these are legal ways to resolve debts.

So bankruptcy in and of itself does not harm your ability to obtain or maintain a security clearance. Indeed bankruptcy can often be crucial in successfully getting or retaining your security clearance. But it’s very much depends on the facts of each person’s case, and on the nature of the debts and the person’s conduct in acquiring and then dealing with them.

Set an appointment at one of our offices in Salem, Portland or Vancouver to see whether our bankruptcy law firm would be a good fit for you. If your schedule makes it difficult to come in the office, set a video or phone appointment right on website. I am always happy to discuss the benefits of bankruptcy for Oregonians in financial trouble.

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