Debt and Your Security Clearance

Debt and Your Security Clearance

By: Jeffrey W. Bennett, SAPPC, ISP

Bad decisions affect the ability to get a security clearance. When it comes to financial mistakes, those bad decisions can linger for years to come. There are many life situations that can cause debt, that are of not fault of the debtor. Some of these situations include military deployment, relying on others to manage finances, finicky housing markets, and bad investments. Those who suffered under massive debt after the housing market burst asked, “How will my bankruptcy impact my clearance?” A quick study of security clearance decisions can provide an answer.
Adjudicative Guideline F; Financial addresses when a person lives above their means or fails to pay debts. They could exhibit poor self-control, lack of good judgement, or just show lack of willingness to follow to rules and regulations. This behavior raises questions about loyalty, reliability, and ability to protect classified information. Here are five specific examples of financial issues resulting in clearance denial or revocation.

I Just Don’t Pay Taxes

Applicant’s debts include failing to pay federal and state taxes and required child support. The unpaid taxes were incurred when the applicant failed to file income tax returns in a timely fashion for many years.
Though the applicant states he is trying to pay debts, he could not provide evidence of responsible behavior, nor could he provide copies of signed tax returns. Additionally, though he has agreed to repay his federal tax debt he has not provided evidence that he is in compliance with the plan. Clearance denied.

Multiple Deployments to a Combat Zone

An applicant owed thousands to the federal government for several years of unpaid taxes. Though the federal tax payments were deferred while he served, the state taxes were not. Though he claims to have paid his debt, he couldn’t show proof. Additionally, he and his wife chose to pay their children’s college tuition instead of the tax debt.
The applicant was denied a security clearance because of his bad decision to prioritize other payments above his obligation to the taxes he owed.

The Housing Bubble Popped

The applicant had almost a million dollars in delinquent debts that he attributed to the housing market crash. Though he owned several pieces of property they were valued lower than when he purchased them.
The applicant filed bankruptcy, but then decided to cancel and sold a house to pay off some of his debts. His debts include time share accounts, a home equity loan, and credit cards.   Some of the debts were resolved through debt forgiveness and some were paid or settled for lesser amounts.  However, the applicant failed to show that he had resolved two of the credit card debts.
The judge ruled against the applicant. Having debts forgiven is not the same as personally paying the debts. The applicant also showed poor judgment in many of his financial decisions. The applicant had not had effective financial counseling and there are no clear indications that his problems are under control.

Temporarily Unemployed

The applicant traces his financial difficulties to his having a disagreement with his supervisor and leaving his job, thinking that he could do better, but was not able to find good work. He got behind in his bills.
Though he eventually found work, he did not follow a plan to repay his debts and continued to acquire more debt. As a result, he failed to sufficiently mitigate the security concern and was denied a clearance.

If I Ignore It, It Will Go Away

Applicant held a significant and tardy debt to the U.S. Department of Education (USDE) for two student loans. He chose not to repay these debts, hoping that it “would just go away”.
Eventually he made arrangements to start paying off this debt when he “decided it was not going to go away.” He also knew that he had to get his “finances straight” because of his “job and security clearance”.
Additionally, the applicant had an unpaid phone bill and ignored payments for over a year until he made arrangements to pay those debts. However, in the SF86 he responded “no” to the question, “Are you currently over 90 days delinquent on any debt(s)?” He also failed to provide a list of debts. Clearance denied.

Takeaway: Live Within Your Means and Seek Help

Though unexpected significant life and market changes can affect your financial situations, it does not always impact your security clearance. In many cases those who were in sudden significant debt due to no fault of their own, but lived within their means, attempted to pay the debt, and sought debt counseling were granted clearances.  Those who ignored the debt and lived beyond their means were not granted clearances.

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