NEWS + ADVICE
Financial Issues and Your Security Clearance
In this economy, it is not uncommon for individuals to have delinquent debts reflected on their credit report. Credit cards are the most common source of delinquent debts. However, as times become tough, Americans are having problems paying debts such as mortgages, car notes, student loans, and taxes. Delinquent debts for any of these types of creditors can negatively impact your periodic reinvestigation.
The Background Investigation
The Standard Form Questionnaire 86 (SF86) has a number of questions on it related to your history of past due debts. The questions are intended to elicit responses related to prior bankruptcies, debts that have been referred to collections, debts that have been charged off, and debts that have been delinquent for at least 180 days, just to name a few.
Before you meet with an investigator, the Agency will review your credit report. When you meet with an investigator, you will be required to thoroughly discuss all delinquencies listed on your SF86, as well as delinquencies on the credit report that you failed to disclose on your SF86. Some questions you will be asked for each delinquent debt include:
- When was the debt incurred?
- When did the debt become delinquent?
- Why did the debt become delinquent?
- Was the delinquency due to circumstances outside of your control?
- What, if any, attempts have you made to reduce or eliminate the debt?
- When do you expect to fully pay off the delinquency?
- Who knows about the delinquency?
Your responses to these questions will assist an adjudicator in making a determination as to your eligibility.
Before You Submit Your Security Clearance Application
1. Make sure that you have reviewed your credit report.
The last thing you want during a subject interview with an investigator is to be surprised about any delinquencies listed on your credit report that you were unaware of. Below are examples of situations which may result in unknown debt:
- Prior or current marriage in which you are unaware that your spouse created debt;
- Medical bills that you were unaware were referred to collections;
- Prior rental or utility bills in which you were unaware that money was still owed;
- Debts that were paid in full but were not properly updated on your credit report; and
- Identity theft.
A defense of, “I didn’t know about that debt” is not an acceptable mitigating condition. Security clearance holders are held to a higher standard, and therefore are expected to know whether or not they owe debts to any creditors.
2. Pay off your debt or have a payment plan in place:
If you owe delinquent debt to a creditor, you obviously want to try to pay this off before your background investigation. However, if you are unable to do this, the next best thing is to at least have a payment plan with the creditor in place. Adjudicators are not only concerned about the amount of delinquent debt you owe, but are concerned about what attempts you are making to resolve the debt. This speaks directly to your responsibility, which is highly regarded by adjudicators.
Whom to Contact to Assist with Further Debt Resolution
Depending on your level of debt, you may have difficulty resolving it on your own. In that instance, you may want to consider one of the following:
- Credit counseling
- Debt consolidation loan
A credit counseling service will provide you with advice on how to manage your money and offer solutions for your current financial situation. A debt consolidation loan is exactly as it sounds: all of your debt is consolidated into one loan so that you make one monthly payment rather than multiple payments to multiple creditors each month. The loan you obtain to consolidate your debt may have a lower interest rate than what you are paying to your creditors.
Although you may think that having a bankruptcy on your credit report will negatively impact your security clearance, this is not necessarily the case. The advantage to a bankruptcy is that it eliminates your delinquent debt (Chapter 7) or creates a payment plan to pay off the debt (Chapter 13).
Be Able to Explain the Reason for the Delinquency
Eliminating or having payment plans in place to pay down the delinquencies is only one aspect of mitigating your financial delinquencies. Additionally, you will have to explain the reasons for your delinquency. Adjudicators are not only concerned about your susceptibility to bribery because of your debt, but are also concerned about the reasons for the delinquent debt. The reasons for the debt provide further insight as to your judgment, reliability, and responsibility. Delinquent debt due to reasons outside of your control will be more favorably viewed than delinquent debt as a result of irresponsible frivolous spending.
Greg Rinckey is the Managing Partner of Tully Rinckey PLLC, one of the largest federal sector employment law firms in the country. Greg is a recognized leader in the military and federal employment law sectors. Nicole Smith, Tully Rinckey Associate, represents government employees and contractors in a wide range of security clearance matters, with a concentration on application and interview counseling. Nicole spent nine years as a national security background investigator. Follow Tully Rinckey on Twitter @FedLawSource.This entry was posted on Monday, November 18, 2013 7:03 am