The Law Dictionary

Your Free Online Legal Dictionary • Featuring Black’s Law Dictionary, 2nd Ed.

Can you still use a VA mortgage loan if you have filed a bankruptcy and foreclosed one in the past?

VA mortgage loans are technically not loans but are merely guarantees on a loan agreement. It is the US Department on Veteran Affairs who approves the application for the guarantee of people who served the country by way of military service. If the applicant qualifies, the VA then provides a guarantee to the lender on behalf of the borrower. This guarantee is very helpful to the applicants since the lender will be entering into a contract of mortgage or loan with security ensuring the return of his capital. VA mortgage loans are also helpful to applicants with bad debts  because it is the government itself that guarantees the payment of the loan. This leads to efficient and easy approval of their loan applications.

People who filed bankruptcy can still avail of VA loans depending on the kind of bankruptcy filed. If the bankruptcy was filed under Chapter 7, the applicant shall have to wait for at least 2 years before he can apply for a VA mortgage loan. Bankruptcy under Chapter 7 allows the defendant to liquidate his assets and discharge his debts. The two year period herein stated shall commence after the termination of the bankruptcy and not on the date of filing. The applicant shall also be required to explain the reason for filing a bankruptcy case.

On the other hand, if the bankruptcy was filed under Chapter 13, the applicant will have to wait for at least one year before he can qualify to apply for a VA mortgage loan. Under the provisions on Chapter 13, the defendant therein shall be allowed to set up a repayment plan with his creditors and will eventually lead to a discharge of his debts after the termination of the repayment schedule. In order for the applicant to validly set up a VA mortgage loan, he must first seek permission from the bankruptcy trustee in his case.

The possibility of setting up another VA mortgage loan after the filing of a bankruptcy case is not that easy. There are other conditions imposed by law for applicants to qualify for the loan. This includes the guarantee that there would be no late payment of the loan. To determine this, the payment history of the applicant will be scrutinized. If there are late payments on the record, the applicant will have to religiously comply with his payment schedule. By doing this, it will be shown that the applicant is interested in rebuilding his credit after the termination of his bankruptcy case.


This article contains general legal information but does not constitute professional legal advice for your particular situation. The Law Dictionary is not a law firm, and this page does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

Recent Bankruptcy & Debt Articles