VA Ch 7 Bankruptcy Rules for Veterans

Phoenix Chapter 7 Bankruptcy Rules

If you ask the majority of Phoenix mortgage lenders when a veteran can buy using a VA mortgage after a chapter 7 bankruptcy the standard answer you would mostly likely hear is 2 years.  While 2 years is generally the waiting period after a chapter 7 bk, the true answer to that question is that VA looks at each borrower with a chapter 7 bankruptcy in the past 2 years on a case by case basis.  The VA guidebook reads as follows:

The fact that a bankruptcy exists in an applicant’s (or spouse’s) credit history does not in itself disqualify the loan.  (Lenders must) Develop complete information on the facts and circumstances of the bankruptcy.  Consider the reasons for the bankruptcy and the type of bankruptcy filing.

VA underwriters are instructed by the almighty VA lender’s guide to dig a little deeper with regard to what the circumstances surrounding the chapter 7 bankruptcy were when reviewing a new VA loan application.  If the  Veteran meets the following two criteria they may be eligible for a VA mortgage within 1 to 2 years after their chapter 7 bankruptcy discharge date (these 2 criteria are both copied here exactly as they appear in the VA lender’s guide).

1. the applicant or spouse has obtained consumer items on credit subsequent to the bankruptcy and has satisfactorily made the payments over a continued period

2. the bankruptcy was caused by circumstances beyond the control of the applicant or spouse such as unemployment, prolonged strikes, medical bills not covered by insurance, and so on, and the circumstances are verified

If a VA underwriter sees that both of the above are documented in the veterans mortgage application/file they may consider that veteran eligible and may approve them for a new VA home loan within 1 year of their chapter 7 bankruptcy discharge date.

Self-Employed Veterans and Bankruptcy

VA also carved out a provision to help self-employed veterans that suffered through a chapter 7 bankruptcy.  The VA lender’s guide states the following regarding this situation:

If the bankruptcy was caused by failure of the business of a self-employed (VA) applicant, it may be possible to determine that the applicant is a satisfactory credit risk if

1. the applicant obtained a permanent position after the business failed

2. there is no derogatory credit information prior to self-employment

3. there is no derogatory credit information subsequent to the bankruptcy

4. failure of the business was not due to the applicant’s misconduct

It is up to your Arizona VA mortgage lender to help you know what documentation to provide in order to document the details necessary to give you the best shot at obtaining Phoenix VA mortgage approval.  When submitting a file where the VA applicant has a chapter 7 bankruptcy within the past 1 to 2 years the outcome will depend heavily on your loan officer‘s ability to properly and thoroughly communicate with a VA underwriter on your behalf.

If you fall into this category and want to see if you can obtain loan approval for a VA mortgage soon after your chapter 7 bankruptcy please call or email me today.  You can also fill out an application online for free right now by clicking Apply Now.

My team and I specialize in VA financing and look forward to assisting you!

By Jeremy House



  1. […] get.  VA borrowers with a prior bankruptcy know this all too well.  Scores of veterans with a prior bankruptcy have been denied or made to jump through so many hoops they give up.  The worst part, its all […]

  2. […] Oftentimes we receive urgent”I NEED HELP” calls from clients who suddenly receive bad news from their current lender.  Among the most common variety of these calls is the call that relates to a loan officer overlooking a critical yet tiny detail.   One such call involved a VA borrower suffering a misreading of their chapter 7 bankruptcy date. […]

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