Security clearance myths are very real. And one of the more pervasive ones is that if an individual has filed for bankruptcy they won’t be able to obtain a security clearance. That myth causes some clearance holders to avoid filing for bankruptcy or taking that step to address debt while holding a security clearance.
True or False: Multiple Bankruptcies Will Result in Clearance Denial
Financial issues are far and above the top cause of clearance denial and revocation. The bad news is bad debt will come back to haunt you. And it will be discovered in the course of a security clearance background investigation or through continuous vetting checks.
A recent case before the Defense Office of Hearings and Appeals highlighted how not just one bankruptcy – but two – impact your clearance eligibility. Bankruptcy can seem like a dirty word – and while it’s a clear indication of an individual who has faced financial issues, it is a proactive step taken to mitigate those issues and create a repayment plan, which can look more favorable than allowing debt to continue to grow.
In this case the applicant declared Chapter 7 bankruptcy in 2015, and then petitioned for Chapter 13 bankruptcy in 2019. The Chapter 13 bankruptcy was still pending at the time the case was presented before DOHA. The initial bankruptcy hadn’t resulted in a Statement of Reasons (SOR), but the second caused the applicant to go before a DOHA judge to petition for his clearance eligibility. In this case, the applicant had two things in his favor:
1. Good documentation.
2. Credible witnesses.
This is where the use of a security clearance attorney likely worked in the applicant’s favor. On face value, the financial difficulties could have been seen as a lack of responsibility. Fortunately for the applicant, he documented specific circumstances that led to both the first and second bankruptcy filing. The DOHA case went into detail, with timelines, payment histories, evidence of working with attorneys or financial advisors as applicable, and specific incidents causing debt that were beyond the applicant’s control – including medical issues for the applicant’s children, and a home purchase gone south.
The second factor that was key was the use of witnesses to corroborate the information. When you have credible individuals who are willing to attest to both your reliability and trustworthiness and how circumstances worked against your favor, it can certainly help. The ‘blame the spouse’ defense never works. But having a spouse testify to the strain of moving from two incomes to one, and dealing with medical issues, can corroborate the documentation. In this case, both the applicant’s spouse and a coworker testified to the issues that were already documented.
False: Bankruptcy Doesn’t Have to be a Clearance Dirty Word
Being proactive is the name of the game when it comes to maintaining clearance eligibility. Multiple bankruptcies obviously aren’t a good look for any clearance holder or applicant. But they can be a better one than six figure debt that hasn’t been resolved.
