Exploring Bankruptcy and Security Clearance in Law Enforcement and Government Jobs
Bankruptcy can often be a financial lifeline for people who find themselves in a mound of debt they can’t get out from under. In many ways, it can be sought as a restart of sorts from a financial perspective, allowing certain debts to be discharged.
Of course, there are ramifications of bankruptcy, including a hit on your credit score, which can affect your ability to get new loans for a certain period of time. That being said, the positives often outweigh the negatives for people who are considering bankruptcy.
One often overlooked aspect of bankruptcy is the fact that it can also affect future job prospects. It’s not always negative, though, as declaring bankruptcy can actually be seen as beneficial to people who need security clearance to work their public-sector jobs or even private-sector jobs.
Below, we’ll dive deeper into bankruptcy and security clearance in law enforcement and government jobs.
Understanding Bankruptcy and Its Implications
There are some implications to bankruptcy that you should be aware of before you file.
Impact on Credit History
Perhaps the biggest bankruptcy implication is the impact it will have on your credit score and history. From strictly a credit score perspective, bankruptcy is perhaps the most damaging thing that can happen.
In some cases, it may reduce your credit score by 200 points or more. But, it’s not just about the reduced credit score. A bankruptcy will also act as a “stain” on your credit report for many years — 10 years for Chapter 7 bankruptcy and seven years for Chapter 13.
This could affect your ability to get new loans and credit cards for that period.
At the same time, declaring bankruptcy could actually be much better for your credit score and history long term compared to constantly missing payments and getting behind on your debt.
Legal Protections
There are some legal protections that people who file bankruptcy enjoy, especially from an employment perspective.
No public institution — whether it be a local, state or federal government agency — can use a person’s bankruptcy as part of the decision-making process for hiring or firing employees.
Similar protections are in place in the private sector in terms of firing decisions. However, private companies are allowed to take bankruptcies into consideration when making hiring decisions.
Security Clearance Requirements in Law Enforcement and Government Jobs
Some law enforcement and government jobs require people to obtain a security clearance. Obtaining this clearance essentially certifies that someone is reliable enough to be trusted with confidential information.
There are various levels of security clearance, and steps that people need to go through in order to obtain them. While having a bankruptcy in your history doesn’t automatically bar you from getting a security clearance, it could affect it in some ways.
Levels of Security Clearance
There are three main types of security clearance — confidential, secret and top secret. Each refers to how severe the risk that the information poses to national security if it were to be compromised.
The higher the security clearance, the more intense and rigorous the process is for obtaining it.
Background Investigations
Every person who wishes to obtain security clearance must undergo a comprehensive background check. This will involve scrutinizing credit reports, criminal records and personal conduct, which is done through interviews.
How in-depth the background check will be depends on the type of security clearance a person is seeking. Generally speaking, they will all cover criminal history, work history, overall behavior and financial status.
The goal of background checks is to identify any potential warning signs that might suggest a person is either unreliable or vulnerable to being influenced by outsiders. If any questions are identified, a person might be designated as not dependable enough to handle certain sensitive information.
Financial Responsibility
The reason why financial responsibility serves as an essential aspect of security clearance is that money troubles could make a person susceptible to bribes — especially for those who deal with sensitive national security information. For instance, if an outsider identifies that a person with security clearance is in financial trouble, they could exploit that to gain access to government secrets.
On a simpler basis, though, financial struggles could also suggest poor decision-making, especially if there’s a long history of unresolved debts, charge-offs and late payments.
All of this could speak to an individual’s reliability and character.
The Effect of Bankruptcy on Security Clearance
While you might think that a bankruptcy would instantly be a bad thing for security clearance, that’s not necessarily the case. While bankruptcies certainly aren’t something to be desired on a background check, they are viewed as better than other financial troubles.
That’s because bankruptcies could help solve a person’s financial troubles, thereby removing a major concern when issuing security clearance. The ideal scenario is a clean financial picture, but bankruptcies are often preferred to mounting debt and being way behind on payments.
Navigating Bankruptcy Court
If you’ve decided that bankruptcy is the best route for you, it’s important that you understand exactly how it works from a legal perspective. The better prepared you are, the more successful your filing will be — and the more you will be able to take advantage of protections offered under U.S. Bankruptcy Law.
Hiring an Attorney
It’s always important to consult with a local attorney who’s experienced with bankruptcy cases in your state. That’s because each state might have different laws when it comes to bankruptcy and different protections that are available.
Doing this on your own is possible, but it’s certainly difficult, to say the least. The professionals at Babi Legal Group can help guide you through your bankruptcy case so you know what’s best for you.
Preparing for Court
Your attorney will help guide you through everything that you need to prepare for court. This includes getting all pertinent financial paperwork together, including tax returns, deeds and personal identification.
The court will want to see a complete and precise representation of your finances, as that will play a critical role in whether your bankruptcy petition is approved. The more prepared you can be, the more likely it is that your case will be approved.
Post-Bankruptcy Steps
Once your bankruptcy is approved, there are certain things that you’ll have to do, depending on what type of bankruptcy you filed. If you still owe some debt as part of a Chapter 13 repayment plan, you’ll need to make sure you make those payments.
In all cases, it’s important to come up with a good budget and a concrete plan for not falling into the same debt hole as you did before. This will be especially important as you look to obtain and/or keep the necessary security clearances for your job.
Improving Credit History
While a bankruptcy will be damaging to your credit score, there are steps you can take to improve it over time. You may not be able to qualify for unsecured credit cards right after bankruptcy, for instance, but secured credit cards that are backed by a deposit of cash can help you build your credit score and financial reputation over time.
Slowly but surely, you can build back your credit score to a reasonable range by making smart financial decisions, such as setting and sticking to a budget and not spending above your means.
Communicating with Employers
While there’s nothing that requires you to tell your employer that you have filed bankruptcy — and little that will automatically notify your employer — doing so is a good idea, as it can foster trust. Having an open line of communication with your employer is always important, but especially so if you have a security clearance or need to obtain one.
It’s always better to be upfront about your situation than to have your employer discover your bankruptcy down the line.
Consult with an Experienced Attorney if You’re Considering Bankruptcy
Bankruptcy can provide a financial lifeline to many people, but there are some implications of filing. It could hamper your ability to obtain a security clearance, or keep one that you currently have.
That’s why it’s always important to consult with an experienced local bankruptcy attorney if you’re considering filing.
At Babi Legal Group, our experts have a combined 15 years of experience in bankruptcy, debt collection and debt settlement. For more information, please contact us today.
