How Bankruptcy Can Protect Your Security Clearance If You Can't Pay Your Bills

Military members

If you're in the military in North Carolina, there's a good chance you have some sort of security clearance ranging from low level to ultra-top secret. Today's post is for all those serving our country that are also struggling with their finances. For those serving at Pope or Seymour Johnson Air Forces Bases, Camp Mackall or Fort Bragg, Coast Guard bases Air Station Elizabeth City and National Strike Force, Camp Lejeune, MCAS Cherry Point, MCAS New River or Military Ocean Terminal Sunny Point, today we've got money advice for you that will help protect your security clearance.

Military families often struggle financially

In recent years, military families have been hard hit and have increasingly relied on food stamps to get by. Military pay is never generous compared to the work the men and women of the Armed Forces do. And junior soldiers are often the hardest hit because they earn the least and if they have families, it can be even more challenging. The sequestration last year hit many soldiers and their families hard and for those that had security clearances and got behind on their bills, the outcome could have been disastrous.

How debt affects your security clearance

Whether it's true or not, the government considers high levels of debt as a warning sign that you may be open to participating in an illegal activity to address your financial problems. Any of these circumstances can disqualify you from keeping your security clearance or gaining a higher one: a pattern of not being able to pay your bills, bouncing checks, lying on tax returns, deliberately not paying debts, taking out debt you know you can't pay or money problems caused by gambling, drinking or drug abuse.

How bankruptcy can help keep your clearance

Filing bankruptcy should not, in itself, cause you to lose your security clearance. It's how you got into debt and how you handled it that are the issue. If you intentionally took on debt that you didn't intend to pay, even if it was relieved in bankruptcy, you may see a downgrade or loss of your clearance. But for most military members, this isn't what happened – it was a major life circumstance that triggered the financial problems – as it is with most non-military bankruptcies.

If an illness, divorce or employment hiccup caused your money problems, bankruptcy can get you out of financial distress, give you a financial fresh start and should preserve your clearance. The Air Force Academy advises this on service member debts: “The amount of your unpaid debts, by itself, may jeopardize your clearance, even if you don’t file bankruptcy. In that sense, not filing for bankruptcy may make you more of a security risk due to the size of your outstanding debts. Eliminating your debts through bankruptcy may make you less of a security risk.”

How to find out if bankruptcy can help you and protect your clearance

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