Hello everyone! Just a quick rundown on my current situation. I currently have a secret clearance with DHS. I’ve racked up a bunch of credit card/personal loan debt over the past few years. It’s getting overwhelming at this point and that’s why I’m considering bankruptcy. Can I lose my secret clearance if I file for bankruptcy? Thanks in advance for your input on this.
Can you lose your clearance over this? Yes. Will you? It really depends.
Bankruptcy isn’t what it used to be. The court will order you and your creditors into a repayment plan but you will still be responsible for all of the debt. If you can, get into plans on your own or with the help of an attorney. This will usually pay things off faster with less hassle and fewer problems.
In any case, you need to report this through your FSO. It will be a larger issue if this shows up later.
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I had " a number" of cleared employees file for bankruptcy. In the eyes of the government it can be considered the responsible thing to do. Otherwise, you are ripe for making bad decisions and selling classified material for money. That is the security threat, your vulnerability, under pressure. There are several types of bankruptcy. Some discharge all, some discharge portions, and others simply refinance the debt and you pay all. It is definitely reportable on your next BI, some clients require reporting even for those at Secret, my client requires for TS. It is not likely you lose a clearance for a bankruptcy…but behavior leading to the action and behavior following can cause you to lose your clearance. If you are making $8 an hour and are $150K in debt…you can pay each month but in ten years you will owe about $149K. A solid bankruptcy attorney will review your situation and tell you the legal, logical and ethical path. Please do not go to debt settlement companies. They merely do what you are capable of yourself without cost. We lost several employees to shady companies. I am sure there are legit ones, so far I only saw bad ones where the employees thought they were doing the right thing. They lost their clearances when these companies were not forwarding payments to the companies. If you simply lost control of finances and charged up frivolously…don’t expect a competent attorney to discharge the debt. Those usually get restructured. Stop charging now, establish reasonable repayment plans with each, and start digging out of the hole. Consult with the attorney, but you may not get the result you want. Excessive medical bills, foreclosed home, flood damage, loss of spouse income, are real life events impacting credit. If it is explainable and reasonable you may discharge portions. But you may also lose a home or car depending on the type. I have seen people go on spending and charging sprees prior to attempting to declare bankruptcy. It doesn’t work out well for them. Your charge history, types of charges can be opened to look at. So focus on the behavior leading and following bankruptcy for your answer.
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There ARE reputable debt relief companies. You have to do your due diligence and you have to understand what you are getting. Those who have the biggest problems tend to be those who don’t understand what the debt company is doing.
There are some, for example, who collect payments from you and then, each time there is enough in your account, negotiate a settlement on one of your accounts. For a clearance holder, this can be a problem because ALL of your creditors wait and keep you in collection until you get to them. Others work out smaller payments to all of your creditors each month so that you get to “paying on time” sooner.
Both methods work well to resolve your debts and credit but look very different to an adjudicator.
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Solid advice here. 
Umm, this is not correct at all. There is Chapter 7 BK that absolves the filer of the debt. Chapter 13, that puts the filer in a repayment plan. Every attorney will do a means test to see if the filer qualifies for a BK7 before a BK13 because most people cannot complete the requirements of the BK13, too rigorous. However, to answer the OP’s concern, if he/she is considering BK, he/she should speak to their FSO and exhaust all other options first. If there is not other option other that the BK, then the question becomes, why did he/she get in over their head? Was it due to unforeseen circumstances, hardship etc. Or due to poor financial choices.
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Here’s a question/comment/snide remark: Is it worth while to report this situation BEFORE considering bankruptcy?
I ask because with “continuous evaluation” the government could see a financial problem (eg, plummeting credit score, late notices, etc) before the individual takes any action (or at least any visible action) to address the situation.
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Continuous evals are still in the very beginning stages with no understanding of what Data Elements will be monitored. As far as reporting lifestyle information it’s complicated. For example, if I have a drinking problem do I report this prior to me getting a DUI? If I did report it, then what actions can an agency take if nothing has occurred? Where do we draw the line? Another example would be public records of divorce proceedings. Do I tell my agency that I committed adultery and this is why I am getting a divorce?
I personally do not think that CE is going to work. It is just another federal initiative that never gets completed.
He didn’t speak to bankruptcy, only to so called “debt relief” companies. Huge difference. I can tell you with 30 years, 8 at full scope poly level, bankruptcy happens and is survivable. Very survivable. Yes it is reportable. But even 2 bankruptcies are survivable. I’ve not yet seen 3. Going to any so called debt relief company is not sound execution of “exhausting all other options”.
oh I completely agree with you, maybe my post was not understandable. BK is nothing to worry about.
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It’s good to see this sort of information being shared. I recently hired on with a great company, after 6 months of unemployment, and a near complete financial collapse. We came very close to losing our home and everything we have, but, by God’s blessing, we’re coming out of it now. I had to submit my SF86 yesterday, and it was pretty ugly when I got to the financial area. I’ll be answering for that during my interview, I know for sure, but with each financial issue, we have been able to mitigate (loan mods, payment schedules, etc) via agreements with our lenders and creditors. So, while my credit rating is pretty weak at the moment, we’re doing all the right things to get back on track, and I’m fairly confident that the unlucky SI who gets assigned to me will see that we got here through misfortune, not poor decision making, and that we have since done the responsible thing to get ourselves back in line.
Life happens. Time and again we see that if it is explainable it is understandable. Two income family drops to one, divorce, loss of contract pay with new company, medical situation, etc. Keep fighting, stay in positive touch with the lenders and keep firing away. Hopefully over the next 2 months before the actual investigation starts you see more of a FICO impact. Pay off one debt at a time, focus on the long game, not what is presently in your face. By making steady progress with all debts you show diligence and trustworthiness.
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