A common question I receive is whether declaring bankruptcy is tantamount to handing in your security clearance. The short answer is “no.” In fact, declaring bankruptcy can actually help save a security clearance in certain cases because it helps resolve the security clearance holder’s susceptibility to coercion or bribery.

What many security clearance holders and applicants fail to realize is that its not the bankruptcy itself that is an issue. Rather, the government views bankruptcy as a symptom of underlying problems that must be addressed. If bankruptcy is the symptom, the more serious question then becomes the nature of those underlying problems (AKA the financial “disease”). Circumstances beyond an applicant’s control, such as a business downturn, loss of employment, or major illness, are viewed very differently than an inability to resist the latest sale or an addiction to Gucci bags.

If you are contemplating a bankruptcy, you should know that many, many security clearance holders gone through the process and come out with their security clearance intact. Here are a few things to keep in mind:

The Conditions Resulting in the Bankruptcy are Crucial

Security clearance adjudicators are human and understand that sometimes life happens. As I alluded to previously, you need to be honest with yourself about why you are in the position of contemplating bankruptcy. Did you get hit by a bus and incur massive medical bills? Or did you finance your champagne taste while earning a beer budget salary? These may sound like extreme or silly examples, but you get the point: be realistic about whether your case will garner sympathy from an objective security clearance adjudicator or judge.

Avoid Chapter 7, Where Possible

The ultimate decision on which form of bankruptcy to file must be made by your Bankruptcy Attorney after careful consideration of all relevant issues and a frank discussion with you, the client. Understand, however, that from a security standpoint Chapter 7 bankruptcies are often considered less favorably because of the perception that a debtor is essentially walking away from his or her responsibilities. Every case has unique considerations, but an applicant who has entered into payment plans with creditors is usually viewed as someone more responsible and worthy of a security clearance. The more avoidable the debts were, the more this is true.

Sign-Up for Voluntary Financial Education

As part of the bankruptcy process, you will be required to complete an online financial literacy course approved by the U.S. Trustee Program (the Department of Justice division responsible for acting as the government’s representative in bankruptcies). That program is insufficient for security clearance purposes because it is mandatory and doesn’t show security clearance adjudicators what they ultimately want to see: self-directed efforts on your part to ensure financial problems never occur again. If you are declaring bankruptcy, I strongly recommend signing up for a credit counseling service or enrolling in a personal financial management course, which can often be found at a local community college for a very reasonable price. As an added bonus, the course might actually pay dividends for your finances. (Pun intended).

Obtain Copies of all Three Credit Reports Annually Post-Bankruptcy

Finally, keep in mind the need to continually monitor your finances post-bankruptcy to avoid accruing any new debt. After all, whatever sympathy you had from security officials during your bankruptcy will be quickly squandered if you begin again accruing debt after the bankruptcy. You are entitled to one free copy of your credit report from each of the three reporting bureaus annually – take advantage of it! By keeping on top of your credit report, you’ll help ensure that something as basic as an address change doesn’t result in missed bills.


This article is intended as general information only and should not be construed as legal advice. Consult an attorney regarding your specific situation. 

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Sean M. Bigley retired from the practice of law in 2023, after a decade representing clients in the security clearance process. He was previously an investigator for the Defense Counterintelligence and Security Agency (then-U.S. Office of Personnel Management) and served from 2020-2024 as a presidentially-appointed member of the National Security Education Board. For security clearance assistance, readers may wish to consider Attorney John Berry, who is available to advise and represent clients in all phases of the security clearance process, including pre-application counseling, denials, revocations, and appeals. Mr. Berry can be found at https://www.berrylegal.com/practice-areas/security-clearance/.