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6 min read Jan 30, 2024

VA Loan After Bankruptcy: How to Qualify for One?

Edited By

Megha Mulchandani

Edited By

Megha Mulchandani

Editor, Houzeo

Megha M. is a content editor who loves to play with words. Apart from this, she is a theater artist and a public speaker who transforms into various personas on stage.

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In 2022, around 382,542 people filed for bankruptcy. However, you can still buy a house after bankruptcy and finance it with a VA loan.

To get a VA loan after bankruptcy, you must complete the waiting period and meet the eligibility criteria. You can use this time to get your finances and work towards repairing your credit score.


  • Active and retired military members are eligible for VA loans even after filing for bankruptcy.
  • The waiting period for a VA loan after bankruptcy is usually around 2 years for Chapter 7 and 1 year for Chapter 13 bankruptcy.
  • Eligibilty depends on factors like the type of bankruptcy filed, reason for bankruptcy, your credit history and score, and fulfillment of VA eligibility requirements.

What Is Bankruptcy?

Bankruptcy is a legal process, initiated when individuals and businesses are unable to repay their debts. After you file for bankruptcy, the court assesses your financial situation.

The court reviews your debts and assets. It then decides the best way to address the outstanding obligations. There are many kinds of bankruptcy. However, on an individual level, there are two main types:

  1. Chapter 7 Bankruptcy: This is also known as liquidation bankruptcy. If you file for Chapter 7 bankruptcy, you are compelled to sell off non-exempted assets to repay the mortgage lenders. Some debts are eliminated to reduce the financial burden. Bankruptcy can delay the foreclosure process but cannot stop it.
  2. Chapter 13 Bankruptcy: This bankruptcy requires individuals to reorganize their debts. The court creates a repayment plan for 3 to 5 years. Any remaining debt is discharged after you finish these monthly payments according to the plan.

Moreover, you do not need to sell your assets and can prevent foreclosure.

Can You Get a VA Loan After Bankruptcy?

Yes! It is possible to get a VA loan after bankruptcy. Certain factors determine whether you can qualify for the loan.

Factors for Approval of a VA Loan After Bankruptcy

Veterans can qualify for a VA loan even after they file for bankruptcy. You can refinance homes with VA loans after improving your credit score. Retired and active military personnel can qualify for a VA loan based on three factors:

  1. Bankruptcy Type: The type of bankruptcy you file for Chapter 7 or Chapter 13 determines the loan approval process. You need to be aware of the terms and conditions when applying for VA loans after bankruptcy.
  2. Reasons For Filing Bankruptcy: There are several reasons to file for bankruptcy, such as loss of income, high medical bills, and unaffordable mortgages.
  3. Fulfilling VA Eligibility Requirements: You must acquire the certificate of eligibility before you apply for a VA mortgage after bankruptcy. This document, issued by the Department of Veterans Affairs, assures the lender that you can make timely payments.

How to Qualify for a VA Loan After Bankruptcy?

Qualifying for a VA loan with bankruptcy can be difficult until you can prove your credit repayment ability. You can opt for the assistance of the Department of Veterans Affairs to prepare for loan approval.

Qualifying for VA Loan After Chapter 7 Bankruptcy

Chapter 7 bankruptcy can significantly impact your credit score and bring it down by 130 to 240 points. This can affect your ability to obtain credit in the future. To apply for a VA loan after Chapter 7 bankruptcy discharge you must:

  1. Complete the waiting period of two years.
  2. Make timely payments on your debt.
  3. Rebuild your credit score to 620 and above.

It’s important to note that you can get a VA loan 1 year after Chapter 7. For that, you need to prove that the reasons for bankruptcy were beyond your control. Moreover, you need to have an improved credit history for VA loan approval.

Qualifying for VA Loan After Chapter 13 Bankruptcy

Chapter 13 bankruptcy or ‘reorganization’ bankruptcy usually involves a repayment plan to pay off debts without selling property. You can qualify for a VA loan faster with Chapter 13 bankruptcy on your record.

To apply for a VA loan after Chapter 13 discharge you must:

  1. Complete at least 12 months of repayment of debt.
  2. Report any late payments in the last twelve months.
  3. Rebuild your credit score to 620 and above.

Keep in mind that every mortgage lender’s qualification requirements are different.

Qualifying for VA Loan After Foreclosure

Foreclosure may not be a type of bankruptcy but usually co-occurs with Chapter 7 bankruptcy. It knocks down the credit score by 85 to 160 points. You can still qualify for a VA loan with a foreclosure on your record.

Usually, veterans must go through a seasoning period of 2 years before they can qualify for a VA loan post-foreclosure. When applying for a VA loan after foreclosure:

  1. Document your circumstances in a letter of explanation.
  2. Seek the lender’s advice about the financing options available.

Please note that you can’t use the full entitlement on a new mortgage if your foreclosure involved a previous VA loan.

How to Increase Your Chance of Approval During the Waiting Period?

You can prepare for VA loan approval during the bankruptcy waiting period. Improving your credit score and managing your finances can get you faster approval.

  1. Rebuild Your Credit: Lower your debt-to-income ratio by paying bills and repaying debt on time. Keep your credit card limit low and use a small percentage of the available credit.
  2. Save for a Down Payment: You can keep aside some monthly amount for a future downpayment. This shows lenders that you’re responsible for your finances.
  3. Work With a Credit Counselor: A credit counselor can help you develop a plan to improve your credit score and manage your finances after bankruptcy. They can also help you understand your credit report and dispute any errors.
  4. Speak to a Lender: Talk to lenders specializing in VA loans to understand your options and navigate the application process. They can also help you identify any additional steps you can take to increase your eligibility.

Bottom Line

Bankruptcy does not close the doors to home financing options. You can still get a VA home loan after bankruptcy if you meet the requirements set by law and the specific approval process of lenders.

Make sure your credit history improves during the waiting period. This is the most important factor in getting VA loan approval. Consult a credit counselor to understand the options and ways to get approval faster.

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Frequently Asked Questions

How long after bankruptcy can I get a mortgage?

You will have to wait for a minimum of 2 years before you can apply for VA mortgage after Chapter 7 bankruptcy and 1 year after Chapter 13 bankruptcy .

What is the process of buying a home after Chapter 7?

After the waiting period of 2 years you can start the mortgage pre-approval process for a VA loan. If your credit history has improved and the credit score is above 620, your loan application is likely to get approved.

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

The main difference between Chapter 7 and Chapter 13 bankruptcy is that the former involves selling of assets and the latter does not require it.

Can I refinance after bankruptcy?

Yes, you can refinance after bankruptcy once you have repaired your credit score.

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