Government Employees and Debt

Background checks: What they’re really looking for

Most federal positions require some level of background investigation before you’re hired. For regular federal employees, this typically means a background check that includes a credit check, even if you’re not getting a security clearance.

This isn’t the same intensive investigation that CIA officers or Pentagon officials undergo, but it does mean someone will look at your financial history. Here’s what they’re actually checking:

• Are you managing your obligations responsibly? They’re looking at whether you pay your bills on time, maintain accounts in good standing, and live within your means. You don’t need to be debt-free or wealthy—they just want to see that you’re handling what you have responsibly.
• Are there red flags for potential problems? Significant delinquencies, collections accounts, judgments, bankruptcies, foreclosures, or patterns of financial chaos may trigger additional scrutiny or questions. They’re trying to assess whether your financial situation creates risk factors for the position.
• Can you be trusted with financial responsibilities? If your position involves handling money, processing payments or benefits, or access to financial systems, your own financial track record becomes more relevant. Someone who doesn’t pay their own bills on time raises questions about whether they can be trusted to process millions in government transactions accurately and honestly.

For most regular federal positions, having some debt or even a few late payments won’t automatically disqualify you. What matters is the overall picture. Medical debt from a health crisis, student loans you’re paying down steadily, or a mortgage you’re current on—these are normal parts of life and won’t typically cause problems.

What does raise concerns: accounts in collections that you’re ignoring, patterns of writing bad checks, substantial debts to casinos or evidence of gambling problems, defaults on multiple obligations, or evidence of financial fraud.

Positions of public trust: Beyond security clearances

You’ve probably heard about security clearances, but most regular federal employees don’t need one. However, many positions are still designated as “positions of public trust,” which comes with its own level of scrutiny.

Air traffic controllers are a perfect example. You don’t need access to classified information to guide planes, but you’re in a position where poor judgment, impairment, or compromise could have catastrophic consequences. The FAA designates these positions as requiring a higher level of trust, which means more thorough background checks including financial reviews.

Other common positions of public trust include:

• Benefits and claims processors at agencies like Social Security, VA, and others who handle sensitive personal information and make decisions affecting people’s financial benefits.
• Law enforcement positions including park rangers, Border Patrol agents, and others with arrest authority and access to law enforcement systems.
• Transportation Security Officers at TSA who screen passengers and have access to secure airport areas.
• Financial management positions at any agency, including payroll specialists, budget analysts, and accountants who handle government funds.
• IT specialists who maintain systems containing sensitive information about citizens or government operations.
• Healthcare workers at VA hospitals and other federal medical facilities who handle patient information and controlled substances.

For these positions, your financial history receives closer examination during hiring and may be reviewed periodically during your employment. The agency wants assurance that financial stress isn’t creating circumstances where you might be vulnerable to doing something inappropriate.

When financial problems can cost you your job

Let’s be clear: having debt won’t get you fired from a federal job. Plenty of federal employees carry mortgages, car loans, student debt, and credit card balances without any employment consequences. What can create problems is how you handle debt and what your financial situation reveals about your judgment and reliability.

Here are scenarios that can actually affect your federal employment:

• Defaulting on federal obligations is particularly serious. If you default on federal student loans, owe back taxes to the IRS, or have other debts to federal agencies that you’re ignoring, this creates direct concerns. You’re a federal employee receiving taxpayer-funded paychecks while refusing to pay your obligations to the same government employing you. This raises obvious questions about integrity and can lead to disciplinary action or termination, especially in certain agencies.
• Garnishment of wages can become an employment issue. While federal law protects employees from being fired for a single wage garnishment, multiple garnishments suggest a pattern of financial irresponsibility that may be considered in performance evaluations or suitability reviews. More importantly, if your wages are being garnished for debts to the federal government itself, this can trigger additional scrutiny and consequences.
• Financial fraud or crimes such as writing bad checks, credit card fraud, tax evasion, or bankruptcy fraud are serious issues that can result in termination. These aren’t just financial problems—they’re crimes that directly contradict the trustworthiness required for federal employment.
• Dishonesty during background checks is often more damaging than the financial problems themselves. If you lie about or omit significant debts, bankruptcies, or financial issues on your application or background investigation forms, you’re demonstrating dishonesty. Even if the financial issues themselves wouldn’t have disqualified you, the lie might.
• Recurring financial crises that affect your work performance can become employment issues. If you’re constantly dealing with creditor calls at work, facing eviction and missing work to deal with housing crises, or showing up to work distracted and unable to focus because of financial stress, supervisors may begin documenting performance problems that could affect your employment.
• Position-specific concerns matter too. A postal worker with serious financial problems who suddenly has access to thousands of pieces of mail daily, some containing checks or gift cards, creates obvious concerns. An air traffic controller with gambling debts and financial desperation in a high-stress position raises safety questions.

Most federal employees with debt are fine

Before this sounds too alarming, here’s the reality: millions of federal employees carry substantial debt without any employment problems whatsoever. The key is managing it responsibly.

Consider typical scenarios:

• Student loan debt is extremely common among federal employees, especially those who entered government service after college. As long as you’re making your payments (or have arranged forbearance or income-driven repayment during hardship), student loans aren’t a concern. In fact, the government offers significant benefits to help with this debt, which we’ll discuss shortly.
• Mortgages and car loans are normal life expenses. Nobody expects federal employees to buy houses or vehicles with cash. As long as these loans are current and you’re not stretched so thin that you’re defaulting on other obligations, they’re not employment issues.
• Medical debt is unfortunately common and largely understood as often being beyond someone’s control. If you have medical collections on your credit report but can explain the circumstances and show you’re addressing them as you’re able, this typically won’t derail your federal career.
• Credit card debt is widespread in American society, including among federal employees. Carrying credit card balances isn’t inherently problematic. What matters is whether you’re making at least minimum payments and managing the debt rather than letting accounts go to collections.

The government isn’t expecting financial perfection—they’re looking for financial responsibility and good judgment given your circumstances.

Special benefits: How the federal government helps its employees

While federal employees don’t get special treatment in avoiding their debts, they do have access to some significant benefits that can help manage financial obligations:

• Public Service Loan Forgiveness (PSLF) is one of the most valuable benefits for federal employees with student loans. After making 120 qualifying monthly payments (10 years) while working full-time for any government agency, the remaining balance on your federal student loans can be forgiven—tax-free. For employees with substantial educational debt, this benefit can be worth tens of thousands of dollars. All federal employees are eligible for PSLF regardless of their agency or position.
• Federal Student Loan Repayment Program allows federal agencies to make payments toward employees’ student loans as a recruitment or retention incentive. Agencies can pay up to $10,000 per year, with a total maximum of $60,000 per employee. Not all agencies use this benefit equally—some offer it more readily than others—but it’s worth asking about, especially if you have in-demand skills or the agency is trying to recruit or retain people in your position.
• Employee Assistance Programs (EAPs) are available at all federal agencies and typically include free, confidential financial counseling. If you’re struggling with debt, facing financial decisions, or need help creating a budget or negotiating with creditors, your EAP can connect you with qualified financial counselors. These services are confidential and won’t be reported to your supervisor unless you request that assistance.
• Federal credit unions often provide services specifically helpful for federal employees, including financial counseling, debt consolidation loans at reasonable rates, and other assistance. Many federal employees find that credit unions offer more flexible options than traditional banks, especially when dealing with financial difficulties.
• Allotments and direct deposit can be used strategically to manage debt. You can set up automatic payments through payroll allotments to ensure that critical obligations like rent, car payments, or debt payments are made before you even see the money, helping you avoid missed payments.

Tax debts: The most serious issue for all federal employees

Of all types of debt, unpaid taxes create the most serious concerns across all levels of federal employment. You don’t have to work for the IRS for tax problems to threaten your job.

The reasoning is straightforward: federal employees are paid with taxpayer money. There’s a fundamental contradiction when someone receiving government paychecks isn’t fulfilling their own tax obligations. This creates concerns about judgment, respect for legal obligations, and basic fairness.

This doesn’t mean owing taxes is automatically disqualifying, but it requires careful handling:

• Filed returns with payment plans are generally acceptable. If you’ve filed all required tax returns and set up an installment agreement with the IRS because you can’t pay the full amount immediately, you’re handling your obligation responsibly. Document your payment plan and be prepared to show you’re making payments if asked.
• Unfiled returns are much more serious. Failing to file tax returns is a separate issue from being unable to pay taxes owed, and it suggests a willingness to simply ignore legal obligations. If you have unfiled returns, filing them—even if you can’t pay immediately—should be a top priority.
• Tax liens or levies on your wages will be noticed and will trigger concerns. If the IRS has placed a lien on your property or is levying your wages, address this situation immediately and document your efforts to resolve it.
• Tax fraud or evasion is extremely serious and can result in termination from federal employment, particularly if it results in criminal charges or conviction.

If you’re struggling with tax obligations, work with the IRS to establish a payment plan, request an offer in compromise if appropriate, or seek help from a tax professional. Demonstrating good-faith efforts to address tax debts is crucial for federal employees.

What happens when financial problems are discovered

If your agency becomes aware of financial problems—through a periodic background check, wage garnishment, or other means—what actually happens?

The response depends on the severity of the issues, your position, and your agency’s policies, but here’s a general progression:

• Initial inquiry: You may be asked to provide an explanation of the financial situation. This is an opportunity to explain circumstances, demonstrate that you’re addressing problems, and show documentation of payment plans, financial counseling, or other positive steps.
• Review by HR or security office: Your explanation and documentation will be reviewed, often by both human resources and the agency’s security or personnel suitability office. They’ll assess whether the financial issues create concerns for your position.
• Possible outcomes range from no action (if you’ve demonstrated responsible management of the situation) to requirements for financial counseling, probation, or in serious cases, removal from your position. The most common outcome for employees who are addressing their financial problems responsibly is continued employment, possibly with a requirement for periodic updates on progress.
• Due process: Federal employees have significant due process rights. You can’t be fired without notice and opportunity to respond. If facing serious adverse action, you may have union representation if you’re covered by a collective bargaining agreement, and you have appeal rights through the Merit Systems Protection Board.

The key factor in most cases is honesty and demonstrated effort to address problems. An employee who hides financial problems until they explode into a crisis is viewed very differently than one who proactively discloses difficulties and shows evidence of working to resolve them.

Practical steps for federal employees managing debt

If you’re a federal employee dealing with debt, here are concrete steps to protect both your financial health and your career:

• Keep making at least minimum payments on all obligations. Even when money is tight, maintaining at least minimum payments keeps accounts current and demonstrates responsible management. One or two late payments due to temporary hardship is very different from letting accounts default.
• Communicate with creditors if you’re struggling. Most creditors would rather work out a payment plan than send your account to collections. Contact them before you miss payments, explain your situation, and negotiate reduced payments or temporary hardship arrangements if needed. Document these arrangements.
• Be honest on any background investigation or financial disclosure forms. Omitting or lying about debts, bankruptcies, or financial problems is worse than the problems themselves. Investigators and reviewers understand that people have financial difficulties; they can’t tolerate dishonesty.
• Use your Employee Assistance Program. The financial counseling available through your EAP is free, confidential, and can provide valuable guidance. Take advantage of it before small problems become crises.
• Consider Public Service Loan Forgiveness if you have federal student loans. Get on an income-driven repayment plan, submit your employment certification forms annually, and stay on track toward forgiveness. This program is designed specifically for people like you.
• Address tax issues immediately. If you owe taxes or have unfiled returns, make this your top financial priority. Work with the IRS to file returns and establish payment arrangements. Don’t let tax problems fester.
• Keep documentation. Save paperwork showing payment plans, financial counseling, correspondence with creditors, and efforts to resolve debts. If your financial situation is ever questioned, this documentation demonstrates responsibility.
• Know your rights. Understand the protections you have as a federal employee, including due process rights and union representation if applicable. Don’t panic if financial issues are discovered—respond honestly and show what you’re doing to address them.
• If considering bankruptcy, understand it’s not automatically disqualifying. Bankruptcy can be a responsible way to address overwhelming debt, and many federal employees have filed bankruptcy without losing their jobs. Be honest about it if asked, explain the circumstances, and demonstrate post-bankruptcy financial responsibility.

The bottom line

For most federal employees in regular positions—the air traffic controllers, TSA officers, postal workers, park rangers, VA nurses, benefits processors, and countless others who keep federal agencies running—debt is a normal part of life that won’t affect your career as long as you manage it responsibly.

What matters is demonstrating good judgment, responsibility, and trustworthiness through how you handle your financial obligations. Pay your bills, address problems proactively, be honest about your situation, and take advantage of the resources available to help you manage debt effectively.

There’s always JG Wentworth…

Do you have $10,000 or more in unsecured debt? If so, there’s a good chance you’ll qualify for the JG Wentworth Debt Relief Program.* Some of our program perks include: 

• One monthly program payment 
• We negotiate on your behalf 
• Average debt resolution in as little as 48-60 months 
• We only get paid when we settle your debt  

If you think you qualify for our program, give us a call today so we can go over the best options for your specific financial needs. Why go it alone when you can have a dedicated team on your side?