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Summary

The applicant, a 52-year-old defense contractor, sought a security clearance under Guidelines E (Personal Conduct) and F (Financial Considerations). He admitted to significant financial issues, including over $125,000 in delinquent debts, primarily stemming from his divorce, and a history of not filing tax returns. However, he demonstrated a good-faith effort to resolve these issues through a Chapter 13 bankruptcy plan, which was likely to be approved. The judge found that the applicant's financial problems were largely beyond his control and that he had taken significant steps to address them, leading to a favorable decision.

Under Guideline E (Personal Conduct) and Guideline F (Financial Considerations), the Statement of Reasons alleged the following: Applicant filled out a Government questionnaire on February 3, 2011, in which he stated that he had not “received a written warning, been officially reprimanded, suspended, or disciplined for misconduct in the workplace.” This was a true statement because Applicant actually received a letter of reprimand in March 2011, after the date he filled out the questionnaire (2.a). Applicant answered, “No,” to each of the questionnaires regarding whether he had ever been charged with or convicted of any offense(s) related to alcohol or drugs. This was a false statement. In fact, Applicant had been cited for Driving Under the Influence (DUI) on June 17, 1983. He was eventually convicted for a charge of Reckless Driving and paid a fine and court costs of $91 (2.b). Applicant admits that he is indebted to a creditor for a judgment in the amount of $8,545. No payments have been made on this judgment. This judgment was not included in Applicant’s petition. Applicant states in Post-Hearing Exhibit A, a letter dated August 21, 2013, “I am submitting this to my Bankruptcy lawyers so that it can be added to the case.” This debt is being resolved (1.a). Applicant admits that he is indebted to a security company in the amount of $496. This debt is included in Applicant’s petition. The most recent credit report in the record indicates that Applicant is disputing this debt. It is being resolved (1.b). Applicant admits that he is indebted to a credit card company in the amount of $15,133. This debt is included in Applicant’s petition. It is being resolved (1.c). Applicant admits that he is indebted to a collection agency in the amount of $399. He believes this to be a duplicate of the debt set forth under 1.b. However, this debt is included in Applicant’s petition. It is being resolved (1.d). Applicant admits that he is indebted to a creditor for maintenance fees on a timeshare he owned with his ex-wife in the amount of $9,061. This debt is included in Applicant’s petition. It is being resolved (1.e). Applicant admits that he is indebted to a creditor for a student loan in the amount of $10,610. This debt is included in Applicant’s petition. It is being resolved (1.f). Applicant admits that he is indebted to a creditor for a student loan in the amount of $114. This debt is included in Applicant’s petition. It is being resolved (1.g). Applicant admits that he was indebted to a creditor for maintenance fees on a second timeshare he owned with his ex-wife in the amount of $5,744. According to Applicant, “I gave the property back, and that was supposed to be taken off.” This creditor is named in the petition, but for notice only, with no amount of claim cited. The debt is being resolved (1.h). Applicant admits that he was indebted to a creditor in the amount of $20,705. According to Applicant this debt also concerned the timeshare he owned with his ex-wife. This creditor is named in the petition, but for notice only, with no amount of claim cited. The credit report dated June 15, 2013, states concerning this debt, “Credit Grantor reclaimed collateral to settle defaulted mortgage.” The debt is being resolved (1.i). Applicant admits that he was indebted to a creditor for a student loan in the amount of $8,420. According to Applicant, this debt has been transferred to the creditor in 1.f. This debt is not named in the petition. The credit report dated June 15, 2013, states concerning this debt, “Claim filed with government for insured portion of balance on loan.” Based on all available information, I find this debt is being resolved (1.j). Applicant admits that he is indebted to a creditor on a past-due debt in the amount of $4,078 for a credit card. According to Applicant, he has been making payments on this military credit card from his retired pay. This debt is listed on his petition with a claim amount of $1,000. It is being resolved (1.k). Applicant admits that he was indebted to a city for an unpaid parking ticket for $107. According to Applicant he paid this ticket, but he did not have proof of payment. He states in Applicant’s Post-Hearing Exhibit A that he has requested the city to send him a copy of the paid off ticket, but he had not received it by the time the record closed. The credit report dated June 15, 2013, states that this debt was, “Legally paid in full for less than the full balance.” This debt is resolved (1.l). Applicant admits that he was indebted to a creditor in the amount of $8,249. According to Applicant this debt also concerned a timeshare he owned with his ex-wife. This creditor is not named in the petition. The credit report dated June 15, 2013, indicates both that the account was transferred or sold, and that Applicant was paying account as agreed. Based on all available information, I find the debt is resolved as it is no longer owed to this creditor (1.m). Applicant admits that he was indebted to a creditor in the amount of $35,411. According to Applicant this debt also concerned a timeshare he owned with his ex-wife. This creditor is not named in the petition. Applicant states in Post-Hearing Exhibit A that he has been in contact with this creditor. “They did state that the property was returned and that no monies [were] owed.” The credit report dated June 15, 2013, indicates that the debt was, “Transferred to another lender or claim purchased.” Based on all available information, I find the debt is resolved (1.n). Applicant admits that he is indebted to a creditor in the amount of $805. Applicant maintains that this is the same debt as that set forth in 1.b, and 1.d, above. This debt is not included in his petition. However, concerning this debt, Applicant testified, “I’m just going to clear it through the Chapter 13.” Based on all available information, I find that this debt is being resolved (1.o). Applicant admits that he had not filed his Federal tax returns for tax years 2009, 2010, and 2011. The 2009 tax return was filed July 18, 2012. The 2010 tax return was filed April 8, 2013. The 2011 tax return was filed April 8, 2013. It appears that his 2012 Federal tax return was filed in a timely fashion. Applicant stated he did not file his Federal or state income tax returns for these years because he and his ex-wife were in a dispute over who was to use the mortgage interest deduction for a house they owned while married. The house has subsequently been foreclosed upon and sold (1.p). Applicant admits that he had not filed his state tax returns for tax years 2009, 2010, and 2011. The 2009 tax return was filed on or around October 17, 2012. The 2010 tax return was filed on or around April 8, 2013. The 2011 tax return was filed on or around April 8, 2013. He testified that his 2012 state tax return was filed in a timely fashion (1.q). Applicant admits that he is indebted to the Internal Revenue Service (IRS) for unpaid taxes for tax years 2009, 2010, 2011, and 2012. Based on records from the IRS, and his 2012 tax return, the amount he owes appears to be $41,802. His petition does not currently include past-due taxes for 2009, which appear to total $9,124 (1.r). Applicant admits that he is indebted to his state taxing authority for unpaid taxes for tax years 2009, 2010, 2011, and 2012. His petition does not include past-due taxes for 2009, which appear to be $2,669. Based on his tax returns, the amount he owes appears to be $6,668. His petition includes past-due taxes for 2012 in the amount of $1,894. The total claimed for the state taxing authority is $5,822. According to Applicant, and confirmed by his pay records, there is a garnishment against his pay, which he states is for his state tax delinquency (1.s).

The judge granted the clearance. The government raised disqualifying conditions AG ¶ 19(a), AG ¶ 19(c), AG ¶ 19(g). The judge applied mitigating conditions AG ¶ 20(b), AG ¶ 20(d), AG ¶ 20(c). The decision turned on the following: The applicant demonstrated a good-faith effort to resolve his financial issues through a Chapter 13 bankruptcy plan; The financial difficulties were largely attributed to circumstances beyond the applicant's control, such as his divorce; The applicant took responsibility for his failure to file tax returns and has since filed all necessary returns.

Why the Applicant Prevailed

• The applicant demonstrated a good-faith effort to resolve his financial issues through a Chapter 13 bankruptcy plan.
• The financial difficulties were largely attributed to circumstances beyond the applicant's control, such as his divorce.
• The applicant took responsibility for his failure to file tax returns and has since filed all necessary returns.

Conditions Referenced

Key Rule Quoted

“An applicant is not required to show that [he] has completely paid off [his] indebtedness, only that [he] has established a reasonable plan to resolve [his] debts and has taken significant actions to implement that plan.”

Procedural Posture

• SOR issuedFeb 22, 2013
• Answer filedApr 10, 2013
• Hearing heldAug 7, 2013
• Decision dateSep 20, 2013

Cite For

• Mitigating Conditions for Financial Difficulties Under Guideline F
• Considerations for Personal Conduct Under Guideline E
• Good-faith Efforts in Resolving Financial Issues Through Bankruptcy