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What happens to your security clearance if you file for bankruptcy protection? Will your security clearance be revoked? Will you be terminated from your job? Will your salary be decreased or will you be demoted?

The Bankruptcy code provisions regulate both the public and private sector over discrimination in employment when one files for Bankruptcy protection. Additionally, most employers also have policies and procedures they abide by when it comes to determining future security clearances after bankruptcy.

The Bankruptcy Code provides at 11 USC 525 that employment discriminations are prohibited by both public and private employers against individuals that file for bankruptcy protection. In other words, it is against the law for employers to discriminate against you for filing either a Chapter 7 or Chapter 13 Bankruptcy.

So generally speaking, your employment status should not change. But what about your security clearance. Much of this inquiry ultimately depends upon:

· The nature of your debt, the reasons for your financial troubles, and your efforts to alleviate the same.

· The amount of your unpaid debts, by itself, may jeopardize your clearance, even if you do not 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. There is no hard and fast answer here, with one exception: it never hurts to have a good reputation with your co-workers and your chain of command.

Generally speaking, most security clearances are not affected by bankruptcy. Indeed, even top secret security clearances are rarely if ever affected. The government is looking for situations where someone with security clearance can be compromised. When they see a lot of debt that is not being paid they begin to get concerned because the individual may be more inclined to take a bribe, or as he put it "leave the back door open for $5,000." In reality, they are less concerned when they see a bankruptcy because the problem, and the perceived security threat, has been eliminated.

So if you are considering filing for bankruptcy protection but have concerns over your security clearance, rest assured that you should be fine in all but the rarest of cases.

Bankruptcy offers debtors a fresh start.  Contact us at one of our offices to speak with a lawyer regarding this issue.

At Cristiano & Lillard, we represent clients in the cities of Temecula, Covina, Canyon Lake, Glendora, Hemet, Lake Elsinore, La Verne, Murrieta, Pomona, San Dimas and West Covina, and in the following counties: Los Angeles County, Riverside County and San Bernardino County.