Will I Lose My Security Clearance If I File for Bankruptcy?

You know the complicated process and legal hurdles you had to clear before you got your security clearance. Now that you have it, you know how important it is to protect it – especially when it comes to your career with the federal government.

There are many different reasons why someone can be denied a security clearance or lose it once obtained. Among those reasons are financial considerations, particularly those that could raise a security concern.

According to the Department of Defense, one financial consideration the government takes into account is an “inability or unwillingness to satisfy debts,” but does that necessarily mean filing for bankruptcy will get your security clearance revoked?

It can, but not necessarily so.

Your Reasons for Filing Bankruptcy Matter

When you file for bankruptcy, you must go through the appropriate channels to make this fact known. Your superiors will find out one way or another, and attempting to hide it can only worsen your chances of a positive outcome.

Fortunately, the government is keen to take a nuanced approach when it comes to bankruptcy. After all, plenty of people end up in honest situations where they need a debt discharge and get a clean slate.

For example, bankruptcy may be necessary to deal with the financial fallout of medical debt, divorce, or a loss of employment or income. Reasons like these probably won’t affect your security clearance because they don’t imply much about your reliability or trustworthiness.

That said, other reasons can trigger a review of your security clearance and lead to its revocation. If you file for bankruptcy because of gambling debt, uncontrolled spending debt, attempts to defraud people, or other criminal activity, you can expect your employer to take a deeper interest in your bankruptcy case.

Bankruptcy Can Even Help

Although everyone’s situation is unique, don’t be surprised if your bankruptcy filing is viewed positively by your superiors. Bankruptcy is all about eliminating debt or restructuring it to make paying it off more manageable. If your reasons for filing for bankruptcy don’t reflect poorly on your character, going through with it can enhance how others perceive your reliability and trustworthiness. In other words, if you take action to address your debt, it can be seen as taking action to remediate a possible security risk – and that’s a good thing!