Army OCS, Security Clearance, and Bankruptcy

I recently signed for OCS. My ship date is April 2020. My concern is my security clearance. While everything else in my packet is pristine, I may have to declare bankruptcy after a string of bad luck. I lost a job in March after two weeks when the company decided to cut staff, and then had an offer rescinded due to a conflict check. The expense of moving and security an apartment put me in a financial bind. Despite my best effort to reign in my debt, I am drowning and watching my credit get murdered.

I have been working with a financial counselor and they advised I declare bankruptcy. They do not believe I will be able to get the debt paid off by the time I ship, and the reduction in salary for BTC will mean default. My recruiter says declaring bankruptcy will blow my security clearance, and I will be reclassified.

Has anyone declared bankruptcy and still obtained security clearance?

Look up the 13 adjudicative guidelines. One of them is financial history or something along those lines. There are qualifying and mitigating factors. You’re taking action by going to a counselor and bankruptcy isn’t always bad. Also, when making a decision about approving or denying a clearance, the “whole person” concept is going to be used. One bankruptcy isn’t going to deny you if that’s the only thing in your record. Same goes for a reckless driving ticket, experimental drug usage once or twice…they know you’re a human and make mistakes. In my opinion, you’re 100% good and your recruiter just probably wants you to take another job so he can fill his quota.

There are two kinds of bankruptcy. In one kind, you make arrangement with your debtors to pay off as much of your debt as you can. In the other, you kinda tell everyone to bugger off and dont pay anything. I think the first kind is looked upon more sympathetically, and the second kind rather negatively. Hopefully the financial counselor can get you more accurate details on all this.

I expect that they will want to know why it happened that losing a job in March already has you talking about declaring bankruptcy. It sounds like you were on the edge before that.

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The bankruptcy itself will not cause a security clearance denial. The reason for the bankruptcy and how you handled the process/debts is how you lose the clearance. Timing is also everything. Filiing for bankruptcy, then apply shortly afterwards for a security clearance can be problematic.

If you are delinquent with debts and/or not paying debts - your clearance is already in jeopardy.

I can say that this timeline is not unheard of. I lost my job in January (not this year) and the credit card companies are sharks in the water looking for blood. At 26% interest on some cards if not more as soon as you’re late just once, before I knew it I was way in over my head and knew I wasn’t getting out anytime soon. When I did finally get back to work part time I needed to use the money to pay my secured debts and student loans, etc. When I went back to work full time it was late July so I met with a lawyer to discuss negotiating with my creditors to get back on track and not be 90-120 days late and they said I was better off filing for a chapter 13 which I did in August. It was a horrible time in my life but I was finally able to sleep at night and finally able to answer my phone. But now I find myself wondering if that big credit card debt that I was buried in for a few years for various reasons, but always paid way more than the minimum every month until all of a sudden I was out of work. Guess we will see.

Can an on-going chapter 13 bankruptcy cause HR to rescind an offer and determine that they don’t want to submit you for a clearance at all?

The cost of moving from Denver to Los Angeles, the loss of the job combined with a second job offer being reminded after a conflicts check came back from work I did with opposing counsel hit my finances hard. Upon losing the job in March, I searched for work for nearly two months but hard a difficult time finding a paralegal position as California requires a ABA certificate unlike most states. When I singed with the second after two months of searching, I stopped interviewing with other firms, and moved again to be closer to the office. When they rescinded the offer, it wasn’t until late July that I found full-time employment. So it was nearly 5 months of unemployment and two moves that really caused me to get to this point.