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Chicago Group Repays Veterans' Student Loans

Posted on in Bankruptcy

One local nonprofit is dedicated to paying off the student loans of combat veterans and easing the financial burden that these families face. Eli Williamson founded Leave No Veteran Behind because the average military veteran carries about $56,000 in student debt. Since 2009, this foundation has paid the outstanding student loan debt of 10 veterans.

The federal G.I. Bill does not pay for college loans incurred before enlistment, and federal repayment programs for veterans only repay certain types of student debt. In addition, according to the Defense Department, many lenders do not convey the reduced interest rates and other benefits available to G.I.s. Former Secretary of Defense Leon Panetta said that financial problems were the biggest threat to a person's security clearance.

Bankruptcy and Security Clearance

Many government employees fear that filing bankruptcy may destroy their ability to obtain or keep a security clearance. While it is true that financial problems can affect this important area, a bankruptcy filing does not automatically trigger a loss of security clearance.

DoD Directive 5220.6is the applicable law. Section F pertains to security clearance and financial issues. Understandably, the DoD is concerned that people who are “financially overextended” may turn to illegal means to generate funds. The inverse is also true: unexpected affluence is listed a warning sign as well.

Fortunately, the directive contains a number of possible defenses and explanations for financial problems, including:

  • Pattern of Behavior: In the government's way of thinking, it is much worse to have dozens of smaller unpaid accounts spread out over several years than to have one or two large debts that cannot be reasonably repaid.
  • Illegal Activity: In addition to a lack of funds, does the debtor have any history of fraud, embezzlement, income tax evasion and other financial crimes?
  • Recentness: Time heals all wounds, at least as far as the DoD is concerned.
  • Control: Were the financial problems due to job loss, medical bills, divorce or other problem that was largely beyond the person's control?

Most importantly, there is Paragraph 6 which asks if the individual made a good-faith effort to repay creditors or “otherwise resolve the debt.” A Chapter 13 Bankruptcy, and perhaps even a Chapter 7, can definitely be considered an effort to resolve the debt.

Illinois Bankruptcy Attorneys

A bankruptcy filing does not necessarily void your security clearance. For a free consultation with our experienced Arlington Heights bankruptcy attorneys, contact Newland & Newland, LLP.

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