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               DEPARTMENT OF DEFENSE 
     DEFENSE OFFICE OF HEARINGS AND APPEALS 
 
 
 
 
In the matter of:  ) 
 ) 
  (Redacted)  )   ISCR Case No. 16-00869 
   ) 
Applicant for Security Clearance  ) 
 
 
Appearances 
 
For Government: Carroll J. Connelley, Esq., Department Counsel 
For Applicant: Pro se 
 
 
______________ 
 
Decision 
______________ 
 
 
MATCHINSKI, Elizabeth M., Administrative Judge: 
 
As of late June 2016, Applicant owed delinquent debt on four accounts exceeding 
$60,000. He was granted a Chapter 7 bankruptcy discharge in November 2016 that 
relieved him of legal liability for repayment. His financial situation is improving, and he is 
resolved not to repeat his financial mistakes. Clearance is granted. 
  
Statement of the Case 
 
 On June 29, 2016, the Department of Defense Consolidated Adjudications Facility 
(DOD CAF) issued a Statement of Reasons (SOR) to Applicant, detailing the security 
concerns under Guideline F, financial considerations, and explaining why it was unable to 
find it clearly consistent with the national interest to grant or continue security clearance 
eligibility for him. The DOD CAF took the action under Executive Order (EO) 10865, 
Safeguarding Classified Information within Industry (February 20, 1960), as amended; 
DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program 
(January 2, 1992), as amended (Directive); and the Adjudicative Guidelines for 
Determining Eligibility for Access to Classified Information (AG) effective within the DOD on 
September 1, 2006. 
 
 
2 
 
On July 27, 2016, Applicant answered the SOR allegations and requested a hearing 
before an administrative judge from the Defense Office of Hearings and Appeals (DOHA). 
On October 28, 2016, the case was assigned to me to conduct a hearing to determine 
whether it is clearly consistent with the national interest to grant or continue a security 
clearance for Applicant. On November 1, 2016, I scheduled a hearing for November 29, 
2016. 
 
I convened the hearing as scheduled. Four Government exhibits (GEs 1-4) and four 
Applicant exhibits (AEs A-D) were admitted into evidence without objection. Applicant 
testified, as reflected in a transcript (Tr.) received on December 8, 2016. 
 
While this case was pending a decision, Security Executive Agent Directive 4 was 
issued establishing National Security Adjudicative Guidelines (AG) applicable to all covered 
individuals who require initial or continued eligibility for access to classified information or 
eligibility to hold a sensitive position. The AG supersede the adjudicative guidelines 
implemented in September 2006 and are effective for any adjudication made on or after 
June 8, 2017. Accordingly, I have adjudicated Applicant’s security clearance eligibility 
under the new AG.1 
 
Findings of Fact 
 
 The SOR alleges under Guideline F that, as of June 29, 2016, Applicant owed a 
charged-off debt (amount not alleged) from August 2009 (SOR ¶ 1.a) and three collection 
debts of $31,632 (SOR ¶ 1.b), $30,556 (SOR ¶ 1.c), and $681 (SOR ¶ 1.d). Applicant 
denied the allegations when he answered the SOR. 
 
 After considering the pleadings, exhibits, and transcript, I make the following 
findings of fact. 
 
Applicant is a 45-year-old welder who has worked for a defense contractor since 
February 2015. (GE 1; Tr. 29.) He graduated from high school in June 1989. (GE 2.) 
Applicant and his first wife were married in May 1998 and divorced in December 2005. In 
August 2006, Applicant and his current spouse married. They had a son, who has autism 
(AE A), in November 2007, and a daughter in November 2009. (GE 1.) 
 
There is scant information in the record about Applicant’s employment before he 
joined a union in 2001. He reportedly worked for a hospital in 1997. In October 1997, he 
opened a joint mortgage loan (likely with his first wife) for $96,900. In November 2004. 
Applicant opened a home equity loan for $31,000. Payments on both loans were current, 
and the loans were paid off in May 2005. (GE 3.) Applicant and his first wife were in the 
process of divorce, so it may well be that they sold the house at that time, although the 
evidence is unclear. 
 
                                                 
1 Application of the AGs that were in effect as of the issuance of the SOR would not change my decision in this 
case. 
3 
 
Applicant completed a four-year apprenticeship with a union from September 2001 
to June 2005 to become a welder. He worked as a journeyman welder for the union until 
February 2006, when he became a full-time welder with a local construction company. (GE 
1.) Applicant opened a credit card account in July 2005 (SOR ¶ 1.c) that he used for 
miscellaneous purchases. (GE 3; Tr. 32.)   
 
In August 2006, Applicant bought a new car that he financed for $23,779 (SOR ¶ 
1.a). He made his car loan payments of $447 a month on time. (GE 3; Tr. 60.) In 
September 2007, Applicant purchased a house. (Tr. 64.) He obtained a mortgage loan for 
$199,500 that was to be repaid at $1,664 per month. (GE 3; Tr. 37.) Applicant struggled to 
make the mortgage payments, especially after a reduction in his work hours due to 
economic conditions. (Tr. 33-34.) At times he used the credit cards in SOR ¶¶ 1.b and 1.c 
to make his loan payments. (AE A; Tr. 33.) In January 2009, Applicant was laid off for lack 
of work. He contacted his mortgage lender and indicated that he could not make his 
mortgage payments. He was advised to call back in six months when he would be seriously 
in arrears. (Tr. 36.) Applicant made no payments on the mortgage after January 2009. 
(GEs 1, 3; AE A; Tr. 34.) 
 
Applicant and his spouse abandoned the home and his car and moved to his 
spouse’s native country in March 2009. (GE 1; Tr. 35, 60-61.) His spouse had a 
guaranteed job, and Applicant looked at the move as an opportunity for him to regroup 
after his recent job loss. (Tr. 61-62.) 
 
While Applicant was living abroad, his car loan (SOR ¶ 1.a) was charged off in 
August 2009.2 In December 2009, Applicant’s mortgage lender initiated foreclosure 
proceedings on his home loan. In June 2010, Applicant was found in default for failure to 
appear, and three days later, the lender was awarded a strict judgment of foreclosure. On 
September 23, 2010, the lender filed a motion for deficiency judgment. (AE B; Tr. 37.) 
Applicant believes that the home sold for $60,000. (Tr. 38.) 
 
During his first 11 months abroad, Applicant had no earned income, but his family 
had free lodging. (Tr. 62.) He taught English full time from February 2010 until June 2014, 
when he and his family moved back to the United States. He learned on his return that 
some of his credit card accounts had been placed for collection. (Tr. 44-45.) In July 2014, 
Applicant began working as a welder for a manufacturing company. (GE 1.) He had 
employment income of $17,356 in 2014. (GE 4.) 
 
For his current employment, Applicant completed and certified to the accuracy of a 
Questionnaire for National Security Positions (SF 86) on February 13, 2015. In response to 
the financial record inquiries concerning delinquency involving routine accounts, Applicant 
disclosed that he owed collection debts of $31,632 from July 2011 (SOR ¶ 1.b), $30,556 
from November 2011 (SOR ¶ 1.c), and  $681 from August 2013 (SOR ¶ 1.d). He admitted 
that he had not yet taken any action to address the debts. (GE 1.) 
 
                                                 
2 Applicant testified to his belief that he owed $11,000 on the vehicle when he ceased repayment. (Tr. 58-59.) 
4 
 
As of March 2015, Applicant’s credit report showed that the credit card account in 
SOR ¶ 1.c had been placed for collection in October 2011 for $30,556 after inactivity since 
April 2009. A credit card obtained in January 2009 had been charged off for $31,632 in 
July 2009 and placed for collection in November 2011 (SOR ¶ 1.b). The automobile loan 
was listed as having a zero balance after being charged off in August 2009 (SOR ¶ 1.a). A 
$681 credit card debt was placed for collection in August 2013 due to inactivity since March 
2009 (SOR ¶ 1.d). Applicant had no other outstanding balances on his credit record. (GE 
3.) Despite his employment income of $48,875 in 2015 (GE 4), Applicant made no 
progress in resolving his old collection accounts. He was saving some of his income to 
retain a lawyer. (Tr. 46.) 
 
On January 13, 2016, Applicant was interviewed by an authorized investigator for 
the Office of Personnel Management (OPM). Applicant did not dispute that he was 
delinquent on the accounts in SOR ¶¶ 1.b-1.d, although he believed the balance of the 
credit account in SOR ¶ 1.c was $20,142. He related that his mortgage loan was not fully 
resolved in foreclosure. Applicant explained that he was consulting with a bankruptcy 
attorney to resolve these debts, which he attributed to insufficient income. (GE 2.) 
 
Applicant consulted with an attorney that specializes in assisting consumers with 
their debts. In addition to bankruptcy filing, the attorney offers money management 
services toward repaying debt in full and debt negotiation services to arrange settlements 
with creditors. The attorney advised Applicant to file for a Chapter 7 bankruptcy because 
Applicant’s mortgage lender had filed a motion for the deficiency balance on his mortgage 
loan after foreclosure. (AE A.) Applicant paid the attorney $2,125 on April 25, 2016, for his 
legal services. (GE 4.) A $4,747 income tax refund for 2015 was used for living expenses. 
(Tr. 65.) 
 
On July 25, 2016, Applicant filed a voluntary no-asset Chapter 7 bankruptcy listing 
assets of $14,247, including joint cash savings with his spouse of $1,011, and liabilities of 
$62,869, including the debts in SOR ¶¶ 1.b-1.d. He listed some nonpriority liabilities of 
unknown amount:  his mortgage loan subject to a motion for deficiency, the auto loan for 
his repossessed 2006 model-year vehicle (SOR ¶ 1.a), a credit card account, a collection 
account, and a telephone bill. Applicant reported monthly take-home pay of $2,913 (his 
spouse had no earned income) and household expenses of $3,191. Applicant received 
credit counseling as part of the bankruptcy process. On August 31, 2016, the trustee filed 
his report of no distribution and asked to be discharged from his duties. (GE 4; AE C.) On 
November 2, 2016, Applicant was granted a Chapter 7 bankruptcy discharge, relieving him 
of his personal liability for repaying the debts legally discharged through his bankruptcy. 
(AE D.) 
 
 Applicant’s bankruptcy attorney proposed to Applicant and his spouse that they 
follow a budgeting system, which requires recording of daily expenditures, and they 
agreed. (AE A.) Applicant’s spouse handles their finances. They have a monthly budget 
and are keeping track of their income and expenses. (Tr. 67.) The financial counseling 
required for the bankruptcy taught Applicant about how credit card use escalates financial 
debt and about the importance of keeping track of expenses. (Tr.  56, 67.) 
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As of late November 2016, Applicant was the sole financial provider for the 
household. His take-home pay is $800 a week. His spouse is not employed outside of the 
home because their children need special care. (Tr. 50-51.) Applicant and his spouse rent 
a house at $1,100 monthly, which includes utilities. They pay $170 a month for two cell 
phones. (Tr. 54.) They are living from paycheck to paycheck, although Applicant testified 
that their financial situation is improving because of his overtime earnings and automatic 
six-month raises with his employer. (Tr. 55.) Applicant does not have any open credit card 
accounts. (Tr. 53.) He testified that he is doing his best to live within his means and to learn 
from his financial mistakes, including his poor decision to abandon his financial obligations 
when he moved abroad. (Tr. 56-57, 61.) He drives a 2004 model-year vehicle that he owns 
outright and retained in his bankruptcy. (GE 4; Tr. 52.) 
 
Policies 
 
The U.S. Supreme Court has recognized the substantial discretion the Executive 
Branch has in regulating access to information pertaining to national security,  emphasizing 
that “no one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 
U.S. 518, 528 (1988). When evaluating an applicant’s suitability for a security clearance, 
the administrative judge must consider the adjudicative guidelines. In addition to brief 
introductory explanations for each guideline, the adjudicative guidelines list potentially 
disqualifying conditions and mitigating conditions, which are required to be considered in 
evaluating an applicant’s eligibility for access to classified information. These guidelines 
are not inflexible rules of law. Instead, recognizing the complexities of human behavior, 
these guidelines are applied in conjunction with the factors listed in the adjudicative 
process. The administrative judge’s overall adjudicative goal is a fair, impartial, and 
commonsense decision. According to AG ¶ 2(c), the entire process is a conscientious 
scrutiny of a number of variables known as the “whole-person concept.” The administrative 
judge must consider all available, reliable information about the person, past and present, 
favorable and unfavorable, in making a decision. 
 
The protection of the national security is the paramount consideration. AG ¶ 2(b) 
requires that “[a]ny doubt concerning personnel being considered for access to classified 
information will be resolved in favor of national security.” In reaching this decision, I have 
drawn only those conclusions that are reasonable, logical, and based on the evidence 
contained in the record. Under Directive ¶ E3.1.14, the Government must present evidence 
to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, the applicant 
is responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, or 
mitigate facts admitted by applicant or proven by Department Counsel. . . .” The applicant 
has the ultimate burden of persuasion to obtain a favorable security decision. 
 
A person who seeks access to classified information enters into a fiduciary 
relationship with the Government predicated upon trust and confidence. This relationship 
transcends normal duty hours and endures throughout off-duty hours. The Government 
reposes a high degree of trust and confidence in individuals to whom it grants access to 
classified information. Decisions include, by necessity, consideration of the possible risk 
that the applicant may deliberately or inadvertently fail to safeguard classified information. 
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Such decisions entail a certain degree of legally permissible extrapolation about potential, 
rather than actual, risk of compromise of classified information. Section 7 of EO 10865 
provides that decisions shall be “in terms of the national interest and shall in no sense be a 
determination as to the loyalty of the applicant concerned.” See also EO 12968, Section 
3.1(b) (listing multiple prerequisites for access to classified or sensitive information). 
 
Analysis 
 
Guideline F, Financial Considerations 
 
 The security concerns about financial considerations are articulated in AG ¶ 18: 
 
Failure to live within one’s means, satisfy debts, and meet financial 
obligations may indicate poor self-control, lack of judgment, or unwillingness 
to abide by rules and regulations, all of which can raise questions about an 
individual’s reliability, trustworthiness, and ability to protect classified or 
sensitive information. Financial distress can also be caused or exacerbated 
by, and thus can be a possible indicator of, other issues of personnel security 
concern such as excessive gambling, mental health conditions, substance 
misuse, or alcohol abuse or dependence. An individual who is financially 
overextended is at greater risk of having to engage in illegal or otherwise 
questionable acts to generate funds. Affluence that cannot be explained by 
known sources of income is also a security concern insofar as it may result 
from criminal activity, including espionage. 
 
 An applicant is not required to be debt free, but is required to manage his finances 
in a way as to exhibit sound judgment and responsibility. The Government met its burden 
of establishing by substantial evidence a record of financial delinquency which raises 
security concerns under disqualifying conditions AG ¶ 19(a), “inability to satisfy debts;” and 
AG ¶ 19(c), “a history of not meeting financial obligations.” Available credit reports and 
Applicant’s admissions indicate that a car loan (SOR ¶ 1.a) was charged off in August 2009 
after nonpayment since March 2009. He testified that he owed about $11,000 on the loan 
at the time, but there is no evidence that he owed a deficiency balance after the car was 
repossessed. However, as of June 2016, he owed approximately $62,869 in delinquent 
credit card debt as alleged in SOR ¶¶ 1.b-1.d. 
 
 Applicant has the burden of presenting evidence of explanation, extenuation, or 
mitigation to overcome the security concerns raised by his record of delinquency. Under 
the AG effective for any adjudication on or after June 8, 2017, a record of consumer credit 
delinquency may be mitigated under one or more of the following conditions under ¶ 20: 
 
(a) the behavior happened so long ago, was so infrequent, or occurred under 
such circumstances that it is unlikely to recur and does not cast doubt on the 
individual’s current reliability, trustworthiness, or good judgment; 
 
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(b) the conditions that resulted in the financial problem were largely beyond 
the person’s control (e.g., loss of employment, a business downturn, 
unexpected medical emergency, a death, divorce or separation, clear 
victimization by predatory lending practices, or identity theft), and the 
individual acted responsibly under the circumstances; 
 
(c) the person has received or is receiving counseling for the problem from a 
legitimate and credible source, such as a non-profit credit counseling service, 
and there are clear indications that the problem is being resolved or is under 
control; and 
 
(d) the individual initiated and is adhering to a good-faith effort to repay 
overdue creditors or otherwise resolve debts. 
 
 The evidence suggests that Applicant overextended himself financially ten years 
ago. He had outstanding credit card debt and a car loan obligation of $447 a month when 
he took on a $1,646 monthly mortgage payment in September 2007. However, Applicant 
did not foresee, and had no control over, his then employer’s decisions to reduce his work 
hours and then lay him off in January 2009. Some of his credit card balances were incurred 
to pay his mortgage when his income was reduced. AG ¶ 20(a) applies in that his 
consumer credit defaults from 2009 are not recent. The loss of income due to economic 
conditions implicates AG ¶ 20(b). Even so, neither AG ¶ 20(a) nor AG ¶ 20(b) mitigates his 
demonstrated irresponsibility in abandoning his debt obligations and moving abroad in 
March 2009 for five years without notifying his creditors of his whereabouts. 
 
  Applicant has a credible case for mitigation under AG ¶ 20(c), however. Shortly 
after he returned to the United States, Applicant began working as a welder for a 
manufacturing company in July 2014. He could reasonably be excused from addressing his 
old debts for the first six months as he and his family became resettled. He earned only 
$17,356 in 2014. In February 2015, he began working for his defense contractor employer. 
His employment wages for 2015 totaled $48,857. In lieu of contacting his creditors, 
Applicant focused on saving money so that he could consult with an attorney. His planned 
course of action was responsible, given he was facing possible liability for a sizeable 
deficiency judgment on his mortgage. On the advice of his attorney, he filed a Chapter 7 
bankruptcy in July 2016, after taking approved credit counseling required for the filing. In 
November 2016, he was granted a no-asset discharge of his debts, including the consumer 
credit obligations in the SOR. 
 
 A Chapter 7 bankruptcy does not demonstrate the same indicia of financial 
responsibility as had Applicant made regular debt payments. His creditors have no 
recourse after a Chapter 7 discharge. The Appeal Board has previously explained what 
constitutes a good-faith effort to repay overdue creditors or otherwise resolve debts under 
AG ¶ 20(d): 
 
In order to qualify for application of [the “good faith” mitigating condition], an 
applicant must present evidence showing either a good-faith effort to repay 
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overdue creditors or some other good-faith action aimed at resolving the 
applicant’s debts. The Directive does not define the term “good-faith.” 
However, the Board has indicated that the concept of good-faith “requires a 
showing that a person acts in a way that shows reasonableness, prudence, 
honesty, and adherence to duty or obligation.” Accordingly, an applicant 
must do more than merely show that he or she relied on a legally available 
option (such as bankruptcy) in order to claim the benefit of [the “good faith” 
mitigating condition]. 
 
(internal citation and footnote omitted) ISCR Case No. 02-30304 at 3 (App. Bd. Apr. 20, 
2004) (quoting ISCR Case No. 99-9020 at 5-6 (App. Bd. June 4, 2001)). Nonetheless, 
there is no evidence of delinquent debt that survived the bankruptcy. 
 
Given Applicant’s financial fresh start, the salient issue becomes the likelihood of 
future financial delinquency. In that regard, the financial income and expense information 
on the bankruptcy petition raises some concern in that Applicant and his spouse were 
operating at a monthly deficit of $277. Applicant testified in late November 2016 that their 
$4,747 income tax refund was used for living expenses. When asked whether he felt 
comfortable with his current financial status, Applicant responded that he was doing his 
best to live within his means. In his favor, there is no evidence of any recent delinquency. 
He no longer relies on consumer credit for purchases, and he and his spouse track their 
expenses through a household budget. Applicant’s financial situation is likely to improve in 
the future as his wage earnings increase over time and as he is able to work overtime. The 
evidence suggests that Applicant is likely to make timely debt payments, as he had on his 
automobile loan in the past, if he has the income to make the payments. The financial 
considerations concerns are adequately mitigated. 
 
Whole-Person Concept 
 
In assessing the whole person, the administrative judge must consider the totality of 
an applicant’s conduct and all relevant circumstances in light of the nine adjudicative 
process factors in AG ¶ 2(d).3 The analysis under Guideline F is incorporated in my whole-
person analysis. Some of the factors in AG ¶ 2(d) were addressed under that guideline, but 
some warrant additional comment. 
 
 Applicant managed his finances responsibly during his first marriage. Expenses 
mounted during 2006 and 2007 as he married and bought a new car in August 2006, 
purchased a home in September 2007, and had his first child, who has special needs, in 
                                                 
3 The factors under AG ¶ 2(d) are as follows: 
 
(1) the nature, extent, and seriousness of the conduct; (2) the circumstances surrounding the 
conduct, to include knowledgeable participation; (3) the frequency and recency of the 
conduct; (4) the individual’s age and maturity at the time of the conduct; (5) the extent to 
which participation is voluntary; (6) the presence or absence of rehabilitation and other 
permanent behavioral changes; (7) the motivation for the conduct; (8) the potential for 
pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or 
recurrence.  
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November 2007. In what he now considers to be a “mistake,” he relied on credit cards to 
make his mortgage payments after his hours at work were reduced. When he was laid off 
in January 2009, he informed his mortgage lender that he could no longer make his loan 
payments. He managed to pay his car loan on time for a couple of months, but he showed 
questionable judgment in abandoning both his house and car loans when he moved 
abroad in March 2009. 
 
 However, since his return to the United States in June 2014, Applicant exercised 
good judgment in disclosing his delinquencies when he applied for security clearance 
eligibility,  in seeking legal advice on dealing with his debts, and in then following the advice 
of the attorney by filing for a Chapter 7 bankruptcy and tracking his household expenses 
through a monthly budget. While his financial situation is not yet fully secure, Applicant is 
not taking on new debt for non-discretionary purchases that could compromise his financial 
situation going forward. Security clearance decisions are not intended to punish applicants 
for past transgressions. The security clearance adjudication involves an evaluation of an 
applicant’s current judgment, reliability, and trustworthiness in light of the security 
guidelines in the Directive. See ISCR Case No. 09-02160 (App. Bd. Jun. 21, 2010). For the 
reasons noted above, I conclude that it is clearly consistent with the national interest to 
grant Applicant security clearance eligibility. 
 
Formal Findings 
 
Formal findings for or against Applicant on the allegations set forth in the SOR, as 
required by section E3.1.25 of Enclosure 3 of the Directive, are: 
 
Paragraph 1, Guideline F:  FOR APPLICANT 
 
Subparagraphs 1.a-1.d:  For Applicant 
 
Conclusion 
 
In light of all of the circumstances, it is clearly consistent with the national interest to 
grant Applicant eligibility for a security clearance. Eligibility for access to classified 
information is granted. 
 
 
_____________________ 
Elizabeth M. Matchinski 
Administrative Judge