Bankruptcy Myths Debunked, Part 3

6.) I can only file for Bankruptcy with my Spouse.   Again not true!  Over the years, we have had more than a few situations where one spouse or the other just refused to file. There are also situations where one spouse does not need to file, because all of the debt is in the name of the other spouse.  No need to worry, you don’t have to file a joint case, just because you are married.  The bankruptcy code allows you to file without your spouse.  We will still need to include the non-filing spouses income and expenses on the budget and the means test, as your are part of the same household, but the filing of one spouse will have no impact on the other spouses credit.

Even if you think it is beneficial for only one spouse to file, you are best served with consulting an experienced bankruptcy attorney as there may be beneficial reasons for you to file a joint case or there may be beneficial reasons to file separate cases.

7.) I don’t owe enough to file a Bankruptcy: How much you owe to your creditors has nothing to do with your ability to file a bankruptcy.  There is no minimum level of debt required to file a petition.  The truth is everyone’s situation is different.  The deciding factor is can you handle the debt that you have, can you make your monthly payments to your creditors, are you delinquent with your debt that you do have, are you being sued, are your wages being garnished; basically do you need the protection of a bankruptcy filing.  Do you need a fresh start to be able to achieve financial freedom again.  These are the questions that you need to ask yourself when deciding whether you need to file. What you don’t need to worry about is having enough debt to file, there is no such requirement.

8) If I file Bankruptcy I will lose my security clearance:   Here is what the Air Force has to say about this topic:   “The status of your security clearance can be affected, but it is not automatic. The outcome depends on the circumstances that led up to the bankruptcy and a number of other factors, such as your job performance and relationship with your chain of command. The security section will weigh whether the bankruptcy was caused primarily by an unexpected event, such as medical bills following a serious accident, or by financial irresponsibility. The security section may also consider the recommendations and comments of your chain of command and co-workers. This is an issue that can be argued both ways, so as a practical matter your security clearance probably should not be a significant factor in making your decision about whether to file bankruptcy. 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. By the same token, using a government-approved means of dealing with your debts may actually be viewed as an indication of financial responsibility. Eliminating your debts through bankruptcy may make you less of a security risk.” – Source

The army has also provided some guidance on the topic:

“With the nation in the throes of an economic downturn and entering the seventh year of overseas combat, some Soldiers and civilians are worried about their security clearance.

The stress of combat and the rise in foreclosures have some Soldiers wondering if their security clearance will be impacted.

“All Army personnel should understand that they can obtain counseling services for financial and mental health issues without undue concern of placing their security clearance status in jeopardy,” said Col. Edward Fish, commander, U.S. Army Central Personnel Security Clearance Facility, known as the CCF.

Army leaders want to ensure Soldiers that the security clearance process is fair, equitable and comprehensive and the Army is taking steps to ensure it remains that way. Leading this effort is the deputy chief of staff, G-2, who is responsible for policy formulation, evaluation, and oversight of intelligence activities for the Department of the Army. This includes policy development and oversight of the security clearance process, to include oversight of the CCF.

The CCF reviews personnel security investigations to grant security clearances for Soldiers, civilian employees and contractor personnel. The CCF uses the national adjudicative guidelines to process security clearance requests. These guidelines outline the standard application of the process, which includes consideration of both favorable and unfavorable information, identify specific concerns, and highlight associated mitigating factors.

A bankruptcy or foreclosure will not automatically prevent one from obtaining or maintaining a security clearance, according to G-2 officials. They explain there are many conditions surrounding financial hardships that often mitigate security concerns.

The guideline for financial considerations focuses primarily on individuals who are financially overextended because they may be at risk of engaging in illegal acts to generate funds. For instance, financial guidelines consider “the conditions that resulted in the financial problem were largely beyond the person’s control…and the individual acted responsibly under the circumstances.” Adjudicators identify such conditions as mitigating circumstances.

For example, if an individual did not have financial problems in the past, yet was forced into foreclosure because of a permanent change of station, or PCS move, adjudicators would consider this a mitigating circumstance. However, if the individual has a history of not meeting financial obligations and now forecloses on a home, this would display a pattern of financial irresponsibility that cannot be easily mitigated, officials said.

Likewise, a bankruptcy will not automatically prevent obtaining a security clearance.

There are many other conditions surrounding financial hardships that often mitigate security concerns, officials said. About 98 percent of cases received by the CCF which involve financial issues were granted a security clearance. This trend has been consistent since 2005″. – Source

Thus, as you can see, bankruptcy is not a bar to receiving security clearance as in actuality, the military views individuals that are overextended as more of a security risk and that someone who has filed bankruptcy is looked at as someone who has dealt with their financial issues responsibly.


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