How does Bankruptcy Affect a Security Clearance?

January 21, 2010

Many people living in the greater Washington, D.C. area are required by their employers to maintain security clearances. But what happens to a person’s security clearance if he or she files for bankruptcy?

The bankruptcy code generally prohibits an employer from discriminating against an employee if he or she files for bankruptcy. But, a change in security clearance may or may not qualify as “employment discrimination,” depending on the circumstances.

Although the evidence is anecdotal, a bankruptcy filing alone does not appear to cause an automatic revocation of most security clearances.

Some security officers report that a bankruptcy filing is seen as a positive step if a person has a large amount of debt they were previously ignoring.

In other words, it’s the debt that renders a person with a security clearance vulnerable to being compromised. Bankruptcy helps get rid of the problematic debt.

In fact, I have spoken to people who were counseled by their security officers to file bankruptcy because their debts were too large and seemed to pose a security risk.

However, your security officer will also consider other factors such as how you got into debt and what you did to try to resolve the debt prior to filing bankruptcy.Â You may want to visit this site for more information about how certain security clearance reviews are conducted.

The only way to be sure how a bankruptcy will affect your particular security clearance is to discuss it with your security officer and chain of command, if applicable.