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Will bankruptcy end your industrial security clearance?

People from all walks of life can end up in financial trouble -- including those who work for federal agencies and contractors who have to pass a security clearances as a condition of employment. Many of those people are afraid of bankruptcy court because they're afraid that it will end their security clearance, costing them their job.

If that's your situation, you're probably struggling unnecessarily. In fact, you may actually be putting your security clearance at greater risk by not filing for bankruptcy.

In order to understand why that might be so, it's important to understand the purpose of a security clearance in the first place: it's designed to determine if someone is willing and able to safeguard classified information based on his or her "loyalty, character, trustworthiness and reliability."

While some people see any financial failing as a sign of a faulty character, the reality is that anybody can fall on hard times. All it takes is a spouse who is out of work for an unexpected, extended period of time or a child that has a sudden, severe illness that brings with it a lot of medical bills. Divorce is another common cause for bankruptcy. Most employers are sensitive to those kinds of issues and will understand.

What they may question, however, is your trustworthiness and reliability if you are struggling to juggle crushing debts and keep up the appearance that everything is fine. Someone who is suffering under the weight of a great deal of debt is more likely to be convinced to sell information to the right bidder than someone whose money troubles are being handled through bankruptcy court.

How you file bankruptcy may also concern your employer. Having an open conversation about the steps you are taking certainly shows your character -- because you aren't afraid to face your problems, even when you find them slightly embarrassing.

For advice on your specific situation, it only makes sense to discuss the issue of your debts and your security clearance with an experienced attorney. It is better to do so rather than allow the situation to continue and risk your security clearance as you start to miss payments and accrue more debt through interest and fees.

Source: U.S. Department of Defense: Defense Security Service, "Frequently Asked Questions about the Industrial Personnel Security Clearance Process," accessed March 24, 2017

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