And would it effect them with obtaining and maintaining a security clearance?
Chapter 7 Bankruptcy Attorney
Yes, and Maybe. I tell all my clients that they have to check with their department HR people to see how the bankruptcy will affect their employment. It depends on the job, your classification, and the policy the department has in place.
Disclaimer: This answer does not constitute legal advice. I am admitted in the States of New York, New Jersey and Massachusetts only and make no attempt to opine on matters of law that are not relevant to those three States. This advice is based on general principles of law that may or may not relate to your specific situation. Facts and laws change and these possible changes will affect the advice provided here. Consult an attorney in your locale before you act on any of this advice. You should not rely on this advice alone and nothing in these communications creates an attorney client relationship.
Chapter 7 Bankruptcy Attorney
I have represented several federal employees at the nuclear test site who have security clearance. Not one has lost their clearance or had it affect their job in a negative way. Bad credit & lots of debt can result in a loss of security clearance & disciplinary action. Bankruptcy, especially Chapter 13, is usually seen as a positive way to resolve financial problems.
By all means speak with the appropriate supervisor at your agency before proceeding. Hope this perspective helps!
As a bankruptcy lawyer in Northern Virginia, I have helped about a thousand Federal employees file bankruptcy. I've also helped about a thousand people file bankruptcy who had security clearances (Some Federal employees and some working for federal contractors.)
So, yes, Federal employees can file bankruptcy. And the government can't by law and won't discriminate against you because of bankruptcy.
The security clearance issue is trickier. If you have a clearance and file bankruptcy promptly, when you get into trouble, your clearance almost certainly won't be affected. (Only in very, very high clearances and in very, very, very secure locations is bankruptcy a problem.) People with clearances lose those clearances if they irresponsibly let their problems drag around until the clearance people get involved. Filing bankruptcy right before they are about to revoke your clearance for financial irresponsibility does not save your clearance. They want you to face up to problems when they are problems, not wait for someone to tell you what to do.
But if you have never had a clearance, and you have a bankruptcy, some agencies won't put you through for a clearance. So you want to stay current until your clearance is approved. Financial troubles will cause you to be denied a clearance. Bankruptcy can cause you to be denied if you have never had a clearance.
For people applying for a clearance while their credit is going bad, I recommend a Chapter 13. A chapter 13 sets everything up in a payment plan through the bankruptcy court. So you are legally current, even though you are not actually current.
If you are a Federal employees, trying to get a clearance, and falling behind on your debts, I'd talk to a Virginia bankruptcy lawyer about getting into a Chapter 13 now.