Hello world! Please change me in Site Preferences -> This Category/Section -> Lower Description Bar


Aug 2011

Bankruptcy and security clearance, and defense cutbacks.

Posted by / in General Information About Bankruptcy Law / 19 comments

Defense cutbacks are now certain.  (At least as certain as anything is in this world.)

Lots of people whose jobs seem safe now will soon be out of work.

Will you lose your job and get behind on your debts?  Please don’t jeopardize your security clearance–and your future.  Please don’t put off filing bankruptcy.

That’s the lesson of the thousand people with security clearances I’ve helped. And the lesson of the half dozen who lost their security clearances because they filed bankruptcy too late.

Bankruptcy and security clearance

Virginia bankruptcy lawyer Robert Weed on Security Clearances

Some people think the worst thing you can do for your clearance is file bankruptcy. That’s completely false. The worst thing you can do is to ignore the problem. If you get into financial trouble, you need to talk to your FSO and then clean it up.

Some people think bankruptcy destroys your security clearance.  That is false.  The worst thing for your security clearance is “irresponsibility.”

It is irresponsible to get into debt you can’t pay.

But if you have debt you can’t pay, the responsible thing to do is clean it up.  The irresponsible thing is to ignore it.   The irresponsible thing is to drag out the problem.

This is not just me talking.  The legal office of the Air Force Academy says the same thing.  (Thanks to the Air Force Academy for putting this valuable information in writing.  So much in the security clearance world is not for publication.)

“Not filing for bankruptcy may make you more of a security risk due to the size of your outstanding debts. By the same token, using a government-approved means of dealing with your debts may actually be viewed as an indication of financial responsibility. Eliminating your debts through bankruptcy may make you less of a security risk.”

Here’s a post on security clearances, from the US Army Ft Meade.  They say it’s a “myth” that filing bankruptcy means you lose your clearance.  They say, and I agree, you need to be ready to explain how and why you got into trouble.

Let me make it clear.  Bankruptcy is not a good thing.  Paying everything on time is a good thing.  But bankruptcy is better than not paying. It is better than ignoring the problem.

I’ve helped a thousand people with clearances; and I know a handful who have lost their clearances.  Nearly all lost clearances for an obvious reason–they did not come to see me in time.  They did nothing until they were told they were in clearance trouble for financial irresponsibility.  Then they checked around.   Then they found out they should have filed bankruptcy when they first got into trouble.

Too late.  They needed to show responsibility by facing the problem when they first got into the financial problem.   Waiting until you get into a clearance problem is waiting too long.

Don’t wait too long.

Bankruptcy and Security Clearance articles by two other lawyers

(Russ DeMott, a bankruptcy lawyer in Charleston, SC, has an excellent article on bankruptcy and security clearances.   His experience is pretty much the same as mine.  Except that he’s mostly talking about active duty military people.  And my experience is mainly with civilians:  DoD, CIA and Homeland Security employees, and employees of contractors in the defense, intelligence and security fields.)

(Here’s a more recent article by Brett Weiss, a bankruptcy lawyer in Maryland, who says pretty much what I am saying here about bankruptcy and security clearances.    He also emphasizes the importance of self reporting to your clearance officer when you get into financial trouble, and before you file the bankruptcy.)

Bankruptcy and Security Clearance Update–December 2014

Yesterday, a Federal agent came to talk to me.  A young lawyer who had worked for me for a couple years had taken a Federal job.  she needed a clearance.

So the Federal agent was doing an investigation.

No surprise there.

Here’s the headline.  The Federal agent, the guy doing the clearance investigation, had filed bankruptcy with me back in 2001.  He didn’t just have a clearance himself–he was doing clearance investigation.  (And back in 2001 he was working for the same agency he was working for now.)

Proof of what I tell people. If you get into financial trouble, you need to clean it up.  And if you can’t clean it up any other way, then file bankruptcy.  The people who lose their clearances are the people who just let the problem get worse.  Be responsible, take control, fix the problem.  File bankruptcy.   (And don’t forget to self-report.)

Bankruptcy and Security Clearance Update–December 2015

Just filed Chapter 7 bankruptcy for Don and Donna.  Both disabled veterans, both battling multiple medical issues, and starting a new family.

They first came to see me in February 2014.  they were in trouble because they downed a house in an area with defense cutbacks that they couldn’t sell.   Told them they needed to file bankruptcy to fix that problem.

Don lost his nerve and they didn’t come back until October 2015.  Don’s clearance had been suspended, along with his job, for financial irresponsibility–and failure to self report.  That’s exactly what I told him would happen, if he did NOT file bankruptcy.  If he was a contract, he’d just be out of luck–and out of a career.  Because he’s a Federal employee, he has more protections.  I’m HOPING that his clearance will be saved on appeal, now that he has, finally, taken care of the problem.


Bankruptcy and Security Clearance Update–December 2017

December 28, 2017

Got an email today from “Candace.” She said she had lost her security clearance because of “financial concerns.” I make this point over and over. People do NOT lose their clearance for filing bankruptcy. You DO lose your clearance for not dealing with the problem. Usually dealing with the problem involves three steps. Talk with a lawyer and figure out what you have to do. Self report that you have financial problems and are taking steps to deal with them. If necessary have the action you are taking approved by a court.

Please select the social network you want to share this page with:

We like you too :)

Thanks for connecting with Robert Weed. We look forward to sharing valuable information with you.

Robert Weed has helped fifteen thousand people file bankruptcy in Northern Virginia. Robert Weed is a frequent panelist and speaker at the meetings of the National Association of Consumer Bankruptcy Attorneys. He is one of Northern Virginia’s most experienced personal bankruptcy lawyers. As an expert on changing consumer bankruptcy laws, Robert Weed has been interviewed on local and national TV and quoted in newspapers across the country.

  • Tom S.

    August 15, 2011, pm31 9:08 PM

    Dear Mr. Weed – I just finalized a Chapter 7 bankruptcy with all of my non-secured debt (except IRS and Sallie Mae) being discharged. One of the debts was a second mortgage with Wells Fargo in which the house was a short sale that my ex-wife and I were co-borrowers. The first mortgage was mostly paid off but the second was not. Since this debt was discharged for me, can Wells Fargo now go after my ex-wife? She has a security clearance she needs to protect and wants to know if she will need to declare bankruptcy because she cannot take on the additional debt. She lives in Northern VA as well.


    • Robert Weed

      August 16, 2011, am31 6:40 AM

      Yes they can and will. Wells Fargo is almost certainly damaging her credit report and jeopardizing her clearance–right now. She can check at experian.com/reportaccess.

      She should certainly talk to a bankruptcy lawyer and if she’s in this area, I’m eager to meet with her.

  • Anthony Ciuca

    November 17, 2011, pm30 3:49 PM

    I agree with Mr. Weed’s opinion regarding a bankruptcy’s effect on an individual’s security clearance status. The federal government considers a person’s financial history as a very important guideline when deciding to grant or deny a security clearance. A person may be more susceptible to blackmail and/or inclined to sell government secrets if that person needs money to pay off substantial debts. Filing for bankruptcy is a legal method for discharging such debt and eliminating that person’s need to obtain money through illegal means. Of course, it is important to note that the government is also concerned about a person’s “attitude” toward their financial affairs as an indicator of responsibility and trustworthiness. However, if you are already delinquent on debts and/or overextended financially, the government will most likely question your clearance status whether or not a bankruptcy petition is filed or not. Therefore, your decision to file for bankruptcy should be based upon your specific financial situation (after consultation with a bankruptcy attorney), rather than concerns about your clearance.
    If your clearance is denied or revoked due to financial considerations, you should be provided an opportunity to appeal for its reinstatement. You should definitely consult with a security clearance lawyer who can assist you with such an appeal.

  • Eric W

    February 14, 2012, pm29 6:10 PM

    I filed bankruptcy with your office in October 2010. In case it is helpful for future clients, I had no issues with keeping my TS security clearance as a result of the Chapter 7, I just needed to report it and provide paperwork with the facts. I even got through my 5-year re-investigation without issues.

    • Robert Weed

      February 14, 2012, pm29 6:10 PM

      Thanks for passing that on.

  • Vicki K

    March 7, 2012, pm31 5:52 PM

    I have just send an email for Mr. Weed to contact my husband and I. We had to relocate to Northern VA because we were both laid off. Thanks so much Eric W!! I just got a new job and also informed the SSO of my issue with my home, told them everything and got my TS clearance reactivated. Now we will take care of this house situation and I will be sure and give the SSO an update as soon as it is done.

  • Robert Weed

    November 19, 2012, am30 10:21 AM

    Just got a call today from someone who met with me in November 2011, and then decided NOT to file bankruptcy. He is calling now because he lost his clearance and then his job.

    Please believe what I say here. Filing bankruptcy is NOT a good thing–paying everything on time is a good thing. But if you can’t pay on time, self reporting and filing bankruptcy gives you a very good chance to save your clearance. Doing nothing gives you a very good chance of losing it.

  • Robert Weed

    May 16, 2013, pm31 8:10 PM

    Got an email today from John, not his real name, telling me he had just gotten approved for a top secret.

    John filed bankrutpcy with me in November 2012, and it had been discharged in March–just two months ago. He had a secret clearance and needed to get top secret. He was able to get top secret just two months out of bankruptcy!

    His facts were good–two big problems: medical expenses of an elderly parent; and a house in Charleston bought when he was stationed there when values were high and now impossible to sell.

    Now, it’s a lot easier to KEEP your clearance through bankrutpcy than to get a new one AFTER bankruptcy. But this is just a reminder for people who have heard that bankrutpcy means you can’t ever get a clearance.

    That’s totally false. Irresponsibility means you can’t ever get a clearance. So if you are in financial trouble, through no fault of your own, responsibility is cleaning it up. Irresponsibility is ignoring the problem.

  • donnel

    September 18, 2013, pm30 4:11 PM

    I recently had my public trust clearance rejected because of mortgages that were showing on my credit. in one mortgage SAXXON mortgage was sued by the FEDS because of illegal foreclosure practices. Another investment mortgage was with BANK OF AMERICA who are also sued by the FEDS.
    My primary home is with WELLS FARGO who are adamant on foreclosing.

    What can I do? I have an interview coming up for another position with IRS in 30 days. If I file CH 7 now will that help give me a clean slate?

    • Robert Weed

      September 18, 2013, pm30 4:18 PM


      Can’t promise you that filing bankruptcy will fix your problem. Only that bankruptcy is FAR LESS of a problem than unpaid debts.

      You know what doing nothing is doing for you–that doesn’t work. You can try to see if bankruptcy will fix it.

  • Racheal

    July 26, 2014, pm31 2:30 PM

    Will my husbands Top secret clearance and career in the military be affected by my bankruptcy? I filed chapter 7 last year and we informed his chain and they said they’ve seen it go either way. But, I’ve talked to others and they said since it was just myself filing and not my husband that it in no way would affect it. I have been worried sick over his clearance getting renewed but like I said the bankruptcy is in my name only.

    • Robert Weed

      July 26, 2014, pm31 9:39 PM


      You should not worry.

  • Robert Weed

    February 2, 2015, pm28 9:30 PM

    Got this email today from someone who had put off filing bankruptcy, but finally, went to talk to the clearance person at her company, and the clearance person at the agency where she works. (I just changed the name of the place where she works.)

    I talked with the security clearance officer in my company and she talked with the clearance officer for the AGENCY and they indicated that I can file for bankruptcy and still expect to keep my clearance; in fact, that may be the only way for me to be able to keep it. The AGENCY person actually recommended Chapter 7 as opposed to Chapter 13 because Chapter 7 simplifies the clearance process once it has been adjudicated because I can present the AGENCY with a clean slate rather than an ongoing payment plan.

  • kenneth sencindiver

    November 2, 2015, pm30 7:57 PM

    yes i wanted to ask you this question, if i file chapter 7 bankruptcy, will my security clearance be affected, i had a stroke back in february, and i was in bad shape where i had to be out of work for a while, and have 16-medical bills to pay for and also credit card debt, and on top of this i am loosing my job at the end of november, can you please help me with some information, i am located in winchester,va.

    thank you Kenneth Sencindiver

    • Robert Weed

      November 3, 2015, am30 11:03 AM


      I don’t know how to be more clear. The best thing for your clearance is to pay everything on time. But if you can’t do it, you need to self report about your financial problems and then take steps to clean them up. the people who lose their clearances are the people who cover up and ignore.

  • Scott

    February 6, 2016, am29 11:58 AM

    I had a car accident 20 years ago that caused me to file chapter 7 BK over 10 years ago. The BK and debt was discharged and I rebuilt my credit and have been debt free and financially solvent since then. Do I have a chance at this point of obtaining a security clearance with the prior bankruptcy? I only had to file the BK years ago due to being unemployed and medical debts.


    • Robert Weed

      February 6, 2016, pm29 12:09 PM

      Scott: I don’t think the bankruptcy will have any measurable impact on your ability to get a clearance. (Unless the medical debts were because of a drug problem or DWI or something like that.)

  • Scared

    May 20, 2016, am31 11:06 AM


    I’m going for a Secret Clearance. I have a high amount of debt but it all gets paid on time. I have had medical bills go to collections in the past but they got paid as soon as I received them and they never went to my credit report. We are a one income family till I get my clearance and will be able to work. My husbands overtime has been cut for the last few months but once I get the clearance we should be okay. If We filled bankruptcy while in the process would that be a stupid move? Do you think I will have a problem getting a clearance?

    • Robert Weed

      May 22, 2016, am31 10:57 AM


      If you can stay current while your application is pending, I’d sure try to do it. Beyond that, your lawyer would need to know the details. For example, if you can’t pay everything, are you able to keep your current while you let him go late–or even file bankruptcy for just the husband.

      Beyond telling you, try to stay current if possible, all I can say is you need a detailed consultation with a very careful lawyer.

Comments & Questions

Leave a Reply

Your email address will not be published. Required fields are marked *