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How does a bankruptcy affect a government security clearance?

Marietta, GA |

If I apply for a government security clearance, would a personal Chapter 7 bankruptcy mean an automatic denia?

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Attorney answers 4


Probably. I have a client who applied for a job with the Department of Defense and was denied the job solely because he recently filed for bankruptcy protection.

I hope this information was helpful.

Van Wieren Law Firm, LLC


Your filing a bankruptcy should not effect your potential clearance. Section 525 of the U.S. Bankruptcy Code specifically directs the government not to discriminate on the basisof a bankruptcy.

In part, here is what 11U.S.C. Section 525 says:

" ... a governmental unit may not deny, revoke, suspend, or refuse to renew a license, permit, charter, franchise, or other similar grant to, condition such a grant to, discriminate with respect to such a grant against, deny employment to, terminate the employment of, or discriminate with respect to employment against, a person that is or has been a debtor under this title or a bankrupt or a debtor under the Bankruptcy Act, or another person with whom such bankrupt or debtor has been associated, solely because such bankrupt or debtor is or has been a debtor under this title or a bankrupt or debtor under the Bankruptcy Act, has been insolvent before the commencement of the case under this title, or during the case but before the debtor is granted or denied a discharge, or has not paid a debt that is dischargeable in the case under this title or that was discharged under the Bankruptcy Act."

This answer is provided for informational purposes only. Actual legal advice can only be provided in an office consultation by an attorney licensed in your jurisdiction, with experience in the area of law in which your concern lies.


No, the bankruptcy will not cause an automatic denial of a government security clearance. There are statutes and additional regulations that protect you as a debtor in bankruptcy and prohibit such discriminatory practices by the government. However, other factors may still cause your clearance to be denied. Make sure that you are completely truthful during the bankruptcy proceedings - any hint that you have used the bankruptcy court for improper purposes or have lied to the court will have significant impact on your security clearance.

In certain circumstances, the filing of bankruptcy actually clears the way to a clearance. If someone has a large debt load that they are unable to manage, it can open that person up to blackmail and other unsavory activities that would cause security to be compromised. By filing for bankruptcy, you are removing this potential by removing the debt.

No attorney-client relationship has been formed by this communication. The information provided herein is for educational purposes only. Should you have further questions, please contact an attorney.

Kimberly DeCarrera, Esq.
(404) 939-5096


Here's HOW it can affect your clearance: When a background investigation is conducted, the "entire person" is considered. That's why such a comprehensive background check is done on a person for a security clearance.

The government doesn't want you to become a risk for someone to extort you or for someone to approach you about selling secrets (secured information) because your financial circumstances are so dire. It is not totally dispositive of denying you a security clearance, but it certainly is cause for concern. As harsh as it sounds, a bankruptcy is a reflection a person's inability to manage their finances and puts into question a person's judgement and self-restraint and self-discipline. When a bankruptcy is discovered, they'll investigate it. From that investigation and looking at the person comprehensively, they will decide whether the factors, circumstances, and timeframe of the bankruptcy is a cause for concern when the government is extending a security clearance to someone.

By the way, the relevance and impact of a bankruptcy on obtaining a security clearance depends on the level of security clearance you are attempting to obtain.

Hope this helps. For further assistance, visit

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